LSE listing for Indian firms soon

The government will explore direct overseas listing of Indian firms on the London Stock Exchange (LSE) only after a plan for overseas listing of domestic firms in the GIFT International Financial Services Centre (IFSC) in Gujarat is implemented, finance minister Nirmala Sitharaman said on Monday.

The minister’s comments came during the meet with the UK Chancellor of the Exchequer Jeremy Hunt at the 12th annual India-UK Economic Financial Dialogue here on Monday.

Hunt earlier said: “We are particularly pleased to have made a big step forward with the first confirmation by India that it will explore the LSE as an international destination for the direct listing of Indian companies.”

Cross-border listing is expected to help Indian firms gain access to a larger base of investors, and attune their corporate governance standards to the best global practices. Manmeet Kaur, Principal Associate, Karanjawala & Co, said: “… the move to consider LSE as one of the international destinations for direct listing of Indian firms will open new avenues for Indian entities, such as better access to international markets and access to a larger base of investors, among others.”

Sitharaman said the UK has expressed willingness to further expand its footprint in the Gift City IFSC and foster a robust fintech partnership.

The International Financial Services Centres Authority (IFSCA), the regulator for IFSCs, is looking to operationalise the framework for direct listing of companies on IFSC exchanges by end-2023. In July, Sitharaman had announced direct listing of Indian companies in GIFT IFSC.

An Indian firm listing on the bourses in IFSC is comparable to listing on an international exchange like the New York Stock Exchange or the LSE. Currently, Indian companies are not allowed to list directly on overseas exchanges as per regulations. However, listed Indian companies can use American Depository Receipts (ADR) or Global Depository Receipts (GDR) to make their shares accessible to overseas investors or list debt instruments on overseas exchanges.

Overseas listing treatment to firms listing in GIFT IFSC would help the Indian firms take advantage of lenient tax rules for the offshore facility. The IFSC is being groomed by the government to make it an international financial hub on the lines of London that could act as a catalyst in attracting foreign investors to Indian corporates which are gaining global prominence and need a large pool of capital from the worldwide.

Both Hunt and Sitharaman said their countries are trying to expedite discussions that would lead to signing the Free Trade Agreement (FTA) and Bilateral Investment Treaty (BIT) as soon as possible.

“We can really support each other’s plans to strengthen the relationship and the way the next step of this is a comprehensive FTA and Bilateral Investment Treaty,” Hunt said.

The much-awaited trade and investment pact with the UK looked to face further delays, going by the statements of Prime Minister Narendra Modi and British prime minister Rishi Sunak after their bilateral meeting on the sidelines of G20 here. Sunak said he was confident a deal with India could be secured but cautioned “there was still hard work to do.”

Investment agreement, rules of origin and intellectual property rights are some of the issues that are proving to be contentious ones in the negotiations. From the Indian side, the demand for easier visas for professionals is seeing some resistance from the UK.

“Today, we have also launched the UK India Infrastructure Financing Bridge. It is a collaborative venture co-led by the Niti Aayog and the City of London Corporation for harnessing collective expertise in planning and implementing major infrastructure projects,” she said.

Hunt said even though London is the world’s second largest financial services centre, majority of asset managers there don’t invest in India. “So there is a huge opportunity, we are looking at changes to the way our pension and insurance funds regulated because there is a strong desire on their part to invest more in productive assets and we have huge pool of capital that are ready to be harnessed,” Hunt said.