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The government is planning to further dilute the norms for Indian companies listing abroad.
The tweaks planned by the finance ministry might do away with the requirement of complying with the domestic disclosure norms prescribed by the Securities and Exchange Board of India (Sebi).
Under the current framework, unlisted Indian entities wanting to list aboard have to meet the regulatory requirements of both the Indian securities regulator, Sebi, and the regulatory authority of the country they opt for listing.
Market experts have said the regulatory overload was proving a major block for the proposal to allow Indian companies to tap foreign markets for equity capital raising, without the pre-condition of domestic listing.
In September 2013, the Centre had allowed unlisted Indian companies to list abroad without having to do an initial public offering (IPO) in India. The move, however, has remained a non-starter, as the requirements prescribed by domestic authorities have been stringent.
According to people in the know, the government is planning to give a further fillip to the American depository receipt (ADR) and global depository receipt (GDR) framework, to ease the requirements for listing aboard.
"To make the scheme a success, we will consult market players on the persisting concerns. We have already made accommodations for some of their basic apprehensions," said a senior finance ministry official.
The ministry is keen on dropping the requirement of having to comply with Sebi disclosure requirements, which market players had said was a major irritant.
Sebi had earlier expressed displeasure with the government proposal on allowing Indian companies to list abroad without having to list here. The rationale behind mandating companies to meet the domestic disclosure requirements was to avoid regulatory arbitrage, Sebi had said.
Earlier this year, a panel headed by former Sebi member M S Sahoo had made recommendations for liberalised depository receipts (DRs). In its recommendations on ADRs/GDRs, the committee had recommended local companies be allowed to issue DRs on all varieties of securities such as debt, equity and mutual fund units. Besides, it recommended issue of both sponsored and unsponsored DRs.
Market players say a major concern remains around taxation issues, yet to be ironed out by the government and revenue department.
"Absence of any issue of ADR should not be a concern. What is material is the availability of ADR facility which brings in competitive pressure on the onshore market. The state should neither promote not discourage ADRs. It should not provide any tax incentive. It must, however, provide a neutral and clear taxation regime," said Sahoo, now secretary of the Institute of Company Secretaries of India.
Finance Minister Arun Jaitley, in his Budget speech, had announced the government would liberalise the framework for depository receipts, both domestic and overseas. The ministry had proposed allowing issuance of DRs on all permissible securities but the Central Board of Direct Taxes has not yet made enabling provisions to recognise the new asset classes in the Income Tax Act.
"The revenue department has raised concerns over possible loss of revenue. We are in dialogue to streamline the issues," said the ministry official.
Sebi has sent a detailed note to the finance ministry, pressing for levy of a securities transaction tax in lieu of long-term capital gains on Indian depository receipts (IDRs). If the short-term capital gains for IDRs are to stay, then the taxation should be at minimal rates.
Currently, both short-term and long-term capital gains taxes are imposed on IDRs, unlike on Indian shares, which are taxable only if capital gains are made within a year.
PASSPORT TO LIST ABROAD
- Issuing securities overseas may become easier
- Centre planning to dilute ADR/GDR norms
- Companies wanting to list abroad may not have to meet Sebi disclosure norms
- Norms also to be aligned with new Companies Act
- Measures following market feedback on existing framework
