Union Finance & Corporate Affairs Minister Nirmala Sitharaman on Friday said that Indian companies can now list their shares on foreign exchanges operating at GIFT City-based International Financial Services Centre (IFSC) in Gujarat.
“I had said in May 2020 that direct listing of securities by public Indian companies would be permissible in foreign jurisdictions. Now I am pleased to announce that the government has taken a decision to enable direct listing of listed and unlisted companies on the IFSC exchanges,” Ms. Sitharaman said.
“This is a major step forward to enable Indian companies to access global capital at better valuations,” she added.
The Finance Minister was in Mumbai to inaugurate a Limited Purpose Clearing Corporation (LPCC) mechanism called AMC Repo Clearing Ltd. (ARCL) and the Corporate Debt Market Development Fund (CDMDF) which will help in the development of a vibrant corporate bond market in India. The FM had made an announcement regarding this during her budget speech of 2021-22.
The LPCC has been set up with the purpose of clearing and settling corporate bond repo transactions and to develop an active repo market. This is expected to improve liquidity in the underlying corporate bond market. The LPCC will allow market makers to access cost-effective funding for their inventory, bondholders to meet their short term liquidity needs without having to liquidate their assets, and entities with short term surpluses to deploy their funds in a safe and efficient manner.
In times of market dislocation, CDMDF on its part with access to ₹33,000 crore capital, will purchase and hold eligible corporate debt securities from participating investors (i.e., specified debt-oriented MF schemes to begin with) and sell as markets recover. The Scheme will act as a key enabler for facilitating liquidity in the corporate debt market and help quick response in times of market dislocation.
The Finance Minister said that the market for repo transactions in government securities was one of the most liquid markets in the country. However, for the failure of a repo market in corporate bonds to take off, lack of Central counterparty had been cited as one of the reasons.
She said that setting up of Limited Purpose Repo Clearing Corporation with the triparty repo services and the central counterparty services of AMC Repo Clearing Ltd. (ARCL) in the bond market would offer better efficiency in collateral and settlement for its members, which in turn would help widen and deepen the corporate bond repo market.
For ease of doing business, and “taking into account national priorities”, the FM, in the presence of Secretary, Department of Economic Affairs (DEA) Ajay Seth and Chairperson, Securities and Exchange Board of India (SEBI) Madhabi Puri Buch on the dais, said the regulatory environment must strive to balance, at all times, the creation of a conducive environment for starting and running of businesses, maintenance of market integrity and sustenance of market stability.
She called for constant dialogue, consultation and understanding between policymakers, regulators and market participants.
