The government has postponed the plan to list foreign companies
NEW DELHI:
The government has frozen plans to allow local companies to list abroad as it seeks to bolster its own capital markets, government officials and industry sources said, as a blow to foreign funds and exchanges seeking to take advantage of the technology. tree of the country.
The decision marks a sudden change in policy after officials said late last year the new rules for foreign offerings would be announced in February.
Three senior government officials who were immediately aware of the decision told Reuters the plan had been shelved because India believes there is enough depth in the local capital markets for companies to raise funds and get good valuations. They declined to be named as the move has not been made public.
The Treasury Department did not respond to a request for comment.
Indian stock markets boomed as eager retail investors and a pandemic-induced flow of easy money pushed prices to record highs, encouraging a slew of Indian tech founders to go local with their initial public offerings (IPOs).
More than 60 companies made their market debut in India in 2021, raising a total of more than $13.7 billion, more than the previous three years combined. Like other global markets, Indian stocks have been confused by the Russian invasion of Ukraine, and volatility has delayed IPO plans.
But the prospects for such quotes deteriorated after the digital payment app Paytm, backed by China’s Alibaba and Ant and Japan’s Softbank, plunged on its debut in November, raising questions about valuations. The share has fallen 75 percent from the issue price.
Even before Paytm’s defeat, US venture capitalists such as Tiger Global and Sequoia Capital had lobbied Prime Minister Narendra Modi to allow Indian companies to list abroad to gain better valuations, Reuters reports.
A second government official said foreign listing rules were now in limbo, and both officials cited the high-ranking food delivery giant Zomato’s stock market debut as contributing to the change of mind.
When Zomato went public on the Mumbai Stock Exchange in July, the bid was 38 times oversubscribed and the stock rose 66 percent. And Indian cosmetics-to-fashion platform Nykaa rose 96 percent on its debut, reaching a valuation of nearly $14 billion.
Both have given up much of that gain in recent months.
Two industry sources briefed by government officials also said they had been told the plan was on hold, also marking a setback for the New York and London exchanges, which had been competing for a share of the deal. India’s fast-growing start-up economy.
LOBBING
Global investors have urged India to allow foreign listings, saying foreign markets would give Indian companies better access to liquidity and capital. But such a move, which has been contemplated since 2020, has deeply divided policymakers.
Nationalist group Swadeshi Jagran Manch, the economic arm of the ideological mother of Narendra Modi’s ruling Bhartiya Janata Party (BJP), opposed the plan, saying such lists would mean less Indian oversight of domestic businesses, while Indian investors would find it more difficult to trade. in shares of companies listed abroad.
Despite intense lobbying against the change, the Revenue Secretary said in August last year that foreign listing rules could be announced in February.
A source with direct knowledge told Reuters on Wednesday that representatives of Swadeshi Jagran Manch had lobbied the finance minister in a private meeting in January to stop the policy announcement.
While the group is widely believed to have a strong influence on Indian policy-making, it’s not clear whether that particular meeting contributed to the government’s decision.
A senior industry manager who has lobbied New Delhi to allow foreign listings said his decision could lead to pressure for other changes from Indian companies.
“Some (investor) funds may want Indian companies to register outside the country,” the director said, adding that such a move could allow them to list abroad more easily.
