Centre may not allow direct listing of Indian companies in China, Hong Kong: Report

This goes against recommendations made by an expert committee set up for this issue by SEBI in 2018

Indian companies may not be permitted to opt for a direct overseas listing on exchanges in China and Hong Kong, on account of rising tensions among the Asian economies.

Even as Hong Kong became one of the favored markets for primary and secondary listings in 2020, second only to the Nasdaq in the US, Indian authorities have kept it and China out of the list of permitted countries for direct overseas listing, Business Standard reported.

Sources told BS that finance and corporate ministries are working with regulators to finalise the framework for foreign listings, to be made public by the end of this month.

“The new framework will allow an Indian entity to list only on those international exchanges which are permitted under India’s Prevention of Money Laundering Act laws,” a senior government official in the know, is quoted as saying in the report.

This goes against recommendations made by an expert committee set up for this issue by the Securities and Exchange Board of India (SEBI) in 2018. The committee had recommended 10 permissible jurisdictions for direct listing including China, Hong Kong, the US, UK, South Korea, Japan, Switzerland, France, Germany and Canada.

A permissible jurisdiction is one that is obligated to exchange information with India and cooperate with the authorities in case of an investigation.

The committee selected these jurisdictions on the basis of the strength of their capital markets, availability of liquidity and stringent listing conditions. It also advised that select stock exchanges be allowed on the list which have strict anti-money laundering laws in place.

Related entities like brokers and prospective investors would have to comply with the rules and requirements of the respective jurisdictions where the company is raising capital, under the new framework.

Presently, Indian companies can only raise funds from foreign entities through the American Depository Receipts route or the Global Depository Receipt route.