The Government of India on 6 December 2013 modified the FDI policy allowing unlisted companies to directly list on stock exchanges abroad. The move will facilitate raising of funds for acquisitions or clearing overseas debts. It may help India in containing its high Current Account Deficit (CAD).
Presently, unlisted companies are not allowed to directly list in overseas markets without prior or subsequent listing in the Indian market.
According to the Revised FDI Policy;
1.Unlisted companies shall be allowed to raise capital abroad without the requirement of prior or subsequent listing in India initially for a period of two years.
2.The capital raised abroad may be utilised for retiring outstanding overseas debt or for operations abroad including for acquisitions.
3.In case the funds raised are not utilised abroad, the company should repatriate the funds to India within 15 days and park it with a scheduled bank and "may be used domestically".
4.While raising funds abroad, the listing companies would have to be fully compliant with the FDI policy.
5. The listing company would also have to comply with the instructions on downstream investment and the criteria of eligibility of who can raise funds through American depositary receipts (ADR) or global depository receipts (GDR) would be as prescribed by the government.
6.The new scheme will be implemented on a pilot basis for a period of two years.
Unlisted Company: a company whose shares are not traded on a stock exchange. Its shares are therefore not available for trade to the general public.
Listed company: a company whose shares are bought and sold on a particular stock market. The share price of a listed company is quoted and traded on a stock exchange.
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Who: Government of India
Where: New Delhi
When: 6 December 2013