India contemplates direct listing of local firms on London Stock Exchange

Regulatory hurdles and deferred plans

Finance Minister Nirmala Sitharaman hints at reconsidering a proposal to permit Indian companies to list directly on foreign exchanges, a plan previously halted due to opposition and tax concerns.

Under current regulations, Indian firms are restricted from directly listing on overseas exchanges, with the only option being the use of instruments like depository receipts. The proposal to change this was introduced in 2020 but was deferred amid worries about potential tax revenue losses and opposition within the ruling party. Concerns centered on diminished regulatory oversight for Indian companies listing abroad.

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Positive signals from joint press conference

During a joint press conference with British Finance Minister Jeremy Hunt following G20 meetings, Sitharaman disclosed India's willingness to explore the possibility of Indian firms directly listing on the London Stock Exchange (LSEG). Hunt expressed satisfaction with this development, highlighting it as a significant step forward. The London Stock Exchange had previously engaged in discussions with Indian technology firms regarding overseas listings in 2020, but these plans were temporarily shelved.

IFSC as a first step

In July, India announced its decision to allow companies to list on exchanges within the International Financial Services Centre (IFSC) located in the Gujarat International Financial Tech City (GIFT). Sitharaman noted that this move would precede any potential further expansion into overseas listings, emphasizing the government's focus on starting with the IFSC as a financial hub to provide easier access to foreign capital markets.

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