Even in the age of globalization, when it comes to foreign listing, corporates have a long way to go. The trend has not caught up so far with just 6% of the total listed companies falling under the category of foreign companies. Again, of the 55 global indices, only a few claim to be home of these foreign firms.
Indian companies are no different. One must note while Indian companies do have securities listed overseas, these are mainly in the form of depository receipts with the underlying equity shares listed on the domestic stock markets, and not a full equity float. Earlier, it was mandatory for Indian companies to list in the domestic market before getting listed abroad. However, the rules have been relaxed by the market regulator, keeping in mind the needs of Indian economy. Indian companies have been provided a 2 year window during which they can sell shares abroad before doing so in the Indian markets.
To make the most of this opportunity, foreign stock exchanges have started wooing Indian companies. The Indian sectors that have shown such interest are technology, biotech, medical, consumer goods, food production and infrastructure sectors. As per an article in Livemint, Tokyo Stock Exchange and the SIX Swiss Exchange have been meeting Indian firms, enticing them with benefits of listing abroad.
Some of these markets, such as Switzerland offer good opportunity for these firms with access to individuals with high net worth and huge assets under management. Others like Tokyo stock exchange will make the cost of raising capital relatively lesser for these companies. Not to mention the benefit of less demanding legal procedures as compared to domestic markets. Some of the companies are likely to benefit from better understanding and benchmarking of business models in the developed markets which will lead to better price discovery. No wonder Indian companies are excited about the offer. Now when a lot of companies are operating across the world and own assets globally, listing businesses separately could be the next step for them. To conclude, we believe it is a positive development that will make capital raising easier for Indian firms companies and help in better price discovery.