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Sep 01, 2021

London Stock Exchange eyes direct listings from India

But Indian government delays policy due to tax concerns

The London Stock Exchange (LSE) has set its sights on Indian IPOs once the new direct overseas listing policy launches.

Once established, this policy will allow Indian companies to list on select overseas stock exchanges. This will be done by issuing their common equity shares to overseas investors instead of DRs. The policy will also allow foreign companies to be listed on the National Stock Exchange of India.  

In addition, Indian companies will likely no longer need to have a prior domestic listing in order to access international equity capital, as is the requirement for the issuance of DRs.

The bill was introduced into the Indian parliament in March 2020 in order to amend the Companies Act 2013. The bill passed in September 2020 but the policy has been delayed: in August 2021 Reuters reported that it will take around six months for India to announce the direct overseas listing policy due to tax concerns.

In a press statement, the LSE explains that nearly 40 percent of its listed companies are from outside the UK. The exchange goes on to note that ‘London stands tall and ready to welcome this new generation of Indian issuers.’

According to the LSE, India has more than 100 private companies worth more than $1 bn, known as unicorns, and it is expected that many of these companies will go public in the UK.

India also has the world’s third-largest start-up ecosystem and 2021 saw Indian start-ups raise $16.9 bn of capital, second only to China, notes the LSE.

‘It is great news for these ambitious companies that the Modi government will be looking to loosen the restrictive laws around IPOs, as international IPOs mean more international investors and therefore more investors in general,’ says Nayan Gala, founder of investment consultancy JPIN.

‘The UK will benefit, too, as many of these start-ups will look to go public in London – providing a boost to publicity and stock volume, and therefore stock value, as well as the firms that service these listings. There is also an increased chance that these companies may expand into the UK after their (hopefully) successful listing – again, giving the UK a further boost.’

Indian firms have raised billions on LSE

Since the mid-1990s, 71 Indian companies have made use of London’s equity markets and raised £8.5 bn ($14.5 bn). There have also been 19 issuers that have raised more than £13 bn on LSE debt markets by issuing 41 Eurobonds and Masala bonds.

The majority of Indian companies that issue common stock to DRs are found on the LSE International Order Book (IOB). The total turnover of Indian DRs in 2020 on the IOB was $3.76 bn, which was 73 percent above 2019 figures.

Maria Ward-Brennan

Maria Ward-Brennan

Maria Ward-Brennan joined IR Magazine as a reporter based in the London office. Previously, she worked as a reporter at Captive Insurance Times, covering a niche specialty insurance market. Maria graduated from the University of Huddersfield in 2019...