Cos Want Budget to Pave Way for Foreign Listing

Many companies and their advisors have reached out to the government and sought a change to existing regulations that will allow unlisted Indian companies to list abroad.

The change, if carried out in the upcoming budget, will also give a push to fund raising through special purpose acquisition companies or SPAC structures, as currently, Indian companies can’t get listed on foreign exchanges directly or through an amalgamation or a merger if they aren’t listed on domestic stock exchanges.

The government announced in 2020 that it would implement regulations allowing companies to list directly on foreign exchanges.

The government had also created a committee that had recommended procedures for Indian companies to directly get listed abroad – but those were put on the back burner due to the Covid-19 pandemic, say people aware of the development.

This time around in the budget, the government could look at allowing foreign listing along with changes in regulation that would facilitate SPACs.

Under SPAC, first a company is listed on a capital market and then raise a particular sum.

The company was created for the sole purpose of raising capital through an IPO. This company then acquires a target company – say an Indian unicorn – through a reverse merger or an amalgamation.

Legal experts say changes will have to be made to the existing Sebi, RBI and tax regulations.

“There are several Indian companies and startup unicorns that could raise funds through SPAC structures outside India, but the current regulations do not allow those kinds of transactions,” said Girish Vanvari, founder of tax advisory firm Transaction Square.

“The government will need to align not just Sebi and RBI regulations but also tax regulations that currently tax outbound amalgamation, mergers, and exchange of shares in the listed SPACs taxable in India. Allowing Indian companies to list abroad directly or through SPAC will only give access to foreign capital for several domestic companies,” said Uday Ved, partner at tax advisory firm KNAV.

The government committee on foreign listing had proposed that Sebi regulations should be amended for foreign listing.

The other problem is also with the RBI framework, where permission is required for any Indian company to be listed. S-ET

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