Govt looks at options to allow listing of startups abroad

New Delhi, July 26, 2023

With an eye on listing of startups, the government is once again discussing plans to work out the rules for overseas issues by Indian companies, a move that may result in some of these entities’ listing in the GIFT City as well.

While the government had amended the Companies Act a few years ago, it has failed to notify the rules to allow for overseas listing due to resistance from the revenue department, which is not keen to deal with the issue of waiver of capital gains tax that would accrue following the listing of the shares. As a result of reluctance from the tax authorities, some of the Indian companies had opted for the SPAC or Special Purpose Acquisition Company route to list overseas.

While an overseas listing was seen as allowing Indian companies to test markets, especially when interest in the economy has significantly gone up due to steady economic growth in recent years, despite the global headwinds, it did not preclude the chances of a domestic listing as well. Apart from the tax department, a section with the government also wanted these companies to list on Indian bourses, to deepen the domestic market.

Officials said the department of economic affairs and the ministry of corporate af fairs are looking at the issue afresh and are expected to work out the guidelines. One of the objectives is to get some of the companies, especially startups to raise funds by listing in exchanges in GIFT City, which is still in a nascent stage of development. In recent years, the government has been offering some of the tax concessions to encourage Indian companies to use the GIFT City window to “internationalise their operations”.

While there is the attraction of listing an Indian company overseas, investors and market players aren’t too upbeat on the idea, arguing that there is very little recall for the Indian companies and gi ven the thin volumes even the coverage by brokerages would be limited.

With several startups listing on Indian exchanges, they suggest that it would be better to list domestically, especially when the investors have also learnt how to deal with them and understand their businesses better.

[The Times of India]