SEBI panel to study option of direct overseas listings

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Mains Paper 2: Polity | Statutory, regulatory & various quasi-judicial bodies

From UPSC perspective, the following things are important:

Prelims level: SEBI, GDR, ADR

Mains level: Market regulators and their powers


News

Companies can list abroad now only via depository receipts

  1. The Securities and Exchange Board of India (SEBI) has constituted an expert committee to examine the possibility of allowing unlisted Indian companies to directly list equity overseas while also allowing foreign companies to list directly on the Indian stock markets.
  2. Considering the evolution and internationalisation of the capital markets, it would be worthwhile to consider facilitating companies incorporated in India to directly list their equity share capital abroad and vice versa, SEBI said in a statement.
  3. Currently, Indian firms can only use the depository receipts route — American Depository Receipt (ADR) or Global Depository Receipt (GDR) — to list on overseas exchanges.
  4. For foreign companies wanting to list on Indian exchanges, the Indian Depository Receipt (IDR) is the only option currently.

Masala bonds, IDRs

  1. Companies incorporated in India can today list their debt securities on international exchanges (Masala bonds) but their equity share capital can be listed abroad only through the ADR/GDR route.
  2. Similarly, companies incorporated outside India can access the Indian capital markets only through the IDR route.

Back2Basics

Global Depository Receipts

  • Indian companies are allowed to raise equity capital in the international markets through the issue of GDR.
  • GDR are designated in USD / Euros or any other foreign currency.
  • The proceeds of GDR can be utilized for various purposes.

American Depository Receipts

  • These are like shares issued to US retail and institutional investors and are listed in NASDAQ/NYSE
  • They are entitled like share to bonus, stock split and dividend.
  • ADR route is taken as non-USA companies are NOT allowed to list on US stock exchanges by issuing shares
Capital Markets: Challenges and Developments
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