Is it true that the government is not likely to encourage Indian companies to list abroad, as originally planned?

While there is no official confirmation, that seems to be the emerging thinking as per reports in the media. For instance, it now looks like the same government which was talking aggressively about catalysing international listing of Indian companies is having second thoughts. India may put restrictions on allowing Indian companies to seek primary listing abroad as well as go through the SPAC route. It would prefer them to adopt local route.

This would be a disappointment for a lot of global players like FPIs, PE funds, global exchanges and local start-ups. There had been hectic lobbying by global brokerages and stock exchanges to facilitate Indian companies to directly list abroad. This freeze will be a setback to global funds and stock exchanges which were actively looking at participating in the digital and technology boom in India. That plan has apparently been shelved.

The government proffers the reason that there is sufficient depth in Indian capital markets. However, there is more to it than meets the eye. It is possible that the recent war in Ukraine and sanctions on Russia would have worried India about being too dependent on vagaries of American policy. Also, the government has seen how the Chinese technology and digital giants endured a tough time after the US decided to arbitrarily ban them from US markets.

There are several reasons for this confidence in domestic markets. In 2021, more than 60 companies did IPOs in India and raised $15 billion; more than the previous 3 years combined. Zomato and Nykaa may have corrected, but the response was very encouraging. To be fair, many digital IPOs like Delhivery, OYO Rooms, PharmEasy and Droom have been delayed despite getting SEBI approval. However, that should be more of an LIC wait.

Several venture capital firms and PE funds have been consistently lobbying with government to permit Indian companies to list abroad for better valuations. This demand became more strident after Paytm cracked 75% from its issue price, despite having a marquee set of investors like Ant Financial, Softbank and Berkshire Hathaway. Tiger and Sequoia PE funds have been key lobbyists, even as digital companies are also looking at the option.

Why is the government worried? After all, global listings give much better access to liquidity and capital. However, the likes of Swadeshi Jagran Manch differ. One factor could be the US markets holding Chinese listed stocks to ransom over compliance. Similarly, US sanctions are normally arbitrary and could have a larger impact on globally listed stocks. In addition, Indian investors having their own problems in trading Indian stocks that are listed abroad.