Exchanges urge India to relax foreign listing rules
International exchange operators are urging regulators in India to relax the requirements local companies need to meet in order to raise capital overseas, according to speakers at the Financial News Indian Investors' Summit in London yesterday.
Indian companies are required to either redomicile overseas, as was the case with miner Vedanta, which listed in London in December 2003, or list in India first, in order to raise foreign capital.
Martin Graham, director of equity markets at the London Stock Exchange said: "It is critical for Indian economic growth for companies to be able to access international capital more easily. We need some relaxation of the rules."
Jeff Singer, senior vice president international, Nasdaq OMX said: "Much of India's growth is going to come from foreign investors but I don't think there will be any grand far reaching changes, rather gradual change."
Graham said the requirements companies need to meet to go abroad was particularly problematic for small companies. He said: "I would love to work in India to build an SME market, but at the moment you can only hold 5% of an exchange [as a foreigner]."
The market for local listings in India has slowed this year after the Sensex 30 index fell by more than 3,000 points in January. The market is dominated by retail investors, which have turned cautious on new listings.
This is partly down to the time lag between selling shares and when they start trading in India, which can be a period of two to three weeks. This was felt in early January by those investors, which bought into initial public offerings when the market was strong, only to be hit when it fell sharply later in the month but had already committed funds.
Singer said: "It was like the ship was going down and no one could get off."
There are also sectors that are less well understood in India than in the UK, such as asset backed companies and media companies, which leads them to list in London, said Sam Tully, director corporate broking, Seymour Pierce.
However, he conceded that Asian markets were becoming more competitive alongside London. He said: "We can't afford to rest on our laurels in London. Asia is giving us a run for our money."
In London 25 Indian companies have listed depositary receipts, there are 22 Indian companies listed on the junior Alternative Investment Market and the main market has two listings, according to Graham.
In the US, 18 companies from India are listed on Nasdaq and NYSE Euronext, according to Singer.
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