The Central Government is reconsidering allowing the listing of domestic companies in foreign exchanges directly, says the Union Finance Minister Nirmala Sitharaman on friday. The Minister was speaking at a joint press conference with British Finance Minister Jeremy Hunt following bilateral talks after the weekend’s G20 meetings in New Delhi.
As per the existing rules, Indian companies are prohibited from directly listing on foreign stock exchanges. Their only option for listing on international exchanges is through instruments like depository receipts like American Depository Receipts (ADRs) and Global Depository Receipts (GDRs). The companies listed overseas through depositories are Infosys, HDFC, Wipro..etc.
The direct listing of Indian companies on foreign stock exchanges will enable them to tap into international sources of funding from various overseas markets. The government held this action thus far because of resistance from the opposition parties and tax-related apprehensions. It was informed that the notification of the direct listing will be notified in a few weeks.
“We are particularly pleased to make a big step forward to make a first confirmation by India that it will explore the London Stock Exchange as an international destination for the direct listing of Indian companies,” Hunt said.
American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) are financial instruments that stand in for ownership of foreign company shares and are traded on global stock markets. These instruments allow investors to access foreign company investments indirectly, eliminating the need to directly purchase shares on foreign stock exchanges.
ADRs are issued by U.S. banks or financial institutions. They represent shares of foreign companies and are traded on U.S. stock exchanges, such as the New York Stock Exchange (NYSE) and NASDAQ. ADRs are dominated by US dollars making them accessible and understandable for U.S. investors.
GDRs are issued by international banks or financial institutions. They represent shares of foreign companies and are typically traded on stock exchanges outside the issuer’s home country. GDRs can be denominated in various currencies, depending on the issuing bank and the preferences of the investors.
Securities Exchange Board of India (SEBI) had suggested permitting listings on stock exchanges in ten “permissible jurisdictions” with robust anti-money laundering regulations, which includes New York Stock Exchange, Nasdaq, LSE, Hong Kong, Canada, Japan, France.. Etc.
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