Unlisted firms can now raise capital abroad without the requirement of prior listing in India initially for a period of two years after the department of industrial policy and promotion (DIPP) on Friday amended the existing policy on the issue of shares.
The DIPP modified the FDI policy allowing unlisted companies to directly list on stock exchanges abroad to raise funds for acquisitions or retiring overseas debts provided these companies comply with Sebi’s disclosure norms.
This comes a month after the Reserve Bank of India (RBI), after a review, decided to allow unlisted companies incorporated in India to raise capital abroad and subsequent endorsement of the same by the Cabinet.
Currently, unlisted companies are not allowed to directly list in overseas markets without prior or subsequent listing in Indian markets.
“Unlisted companies shall be allowed to raise capital abroad without the requirement of prior or subsequent listing in India initially for a period of two years. While raising funds abroad, the listing companies would have to be fully compliant with the FDI policy,” DIPP said in a note.
The department also stated that unlisted companies can directly list abroad only on exchanges in International Organisation of Securities Commissions (IOSCO)/ Financial Action Task Force (FATF) compliant jurisdictions or those jurisdictions with which Sebi has signed bilateral agreements.
“In case the funds raised are not utilised abroad for retiring debt or acquisitions, the company should repatriate the funds to India within 15 days and park it with a scheduled bank and may e used domestically,” it said.
The RBI notification of November 8 had said that the pricing of such ADRs/GDRs to be issued to a person resident outside India would determined in accordance with the FEMA norms and the listing company would also have to comply with the instructions on downstream investment .