NASDAQ talks to India about overseas listings for local companies

(This Jan. 10 story has been officially corrected to remove reference to QQQ after Knight said he was speaking in general terms, not specifically referring to QQQ, in paragraph 12)

By Dhwani Pandya

GANDHINAGAR, India (Reuters) – U.S. stock exchange Nasdaq has held talks with Indian authorities on potentially allowing local Indian companies to list directly on foreign stock exchanges, a senior Nasdaq executive said.

Indian companies are currently not permitted to list their shares directly on overseas markets, but global investors and top Indian startups have been calling for this to change.

Allowing Indian companies to list abroad on exchanges like Nasdaq will give them wider access to capital, Nasdaq’s Executive Vice Chairman Edward Knight said in an interview.

Knight was speaking on the sidelines of a conference near Gujarat International Finance Tec-City (GIFT), where Prime Minister Narendra Modi is seeking to attract foreign investment, months before a re-election bid.

“We are hopeful that when they (rules) are finally promulgated it will facilitate listing of companies not only here in GIFT city but also other jurisdictions,” Knight said. He said Nasdaq held talks in October with Indian Finance Minister Nirmala Sitharaman and markets regulator SEBI Chairperson Madhabi Puri Buch, and asked them if foreign listings could be allowed beyond GIFT, and that foreign bourses should not be excluded from the policymaking.

“Those companies that have interest in reaching out to global investors, particularly companies in technology area, those companies should be allowed to do so,” he said.

India’s finance ministry did not immediately respond to a Reuters request for comment.

The GIFT City project, launched in Gujarat in 2011, aims to become a major international financial hub, where Indian companies can access the global capital markets and investors.

Currently Indian companies cannot list shares directly on GIFT’s tax neutral International Financial Services Centre (IFSC) as regulations are yet to be finalised.

In October, India’s corporate affairs ministry made changes to the law that could pave the way for Indian businesses to list overseas directly, but specific details have not yet been made public. Sources familiar with the process have said the government wants to give the go-ahead for listings on the IFSC first and that direct listings on foreign exchanges will not be allowed initially.

Knight said India has attracted a large amount of foreign direct investment in the past. “Question is, will that continue and one way to facilitate that is to make it easier for Indian companies to initially list outside India.”

Knight also said Nasdaq is planning to facilitate listings of exchange-traded funds (ETFs) which will track Nasdaq indexes, in particular Nasdaq 100. 

India has the world’s third-largest startup ecosystem, which is expected to grow by 12-15% annually, the Indian government says. In 2018, India had about 50,000 startups, of which around 9,000 were technology-focused, based on Indian government sources. Some have attracted global investors such as SoftBank and Sequoia Capital.

Leading investors, including Tiger Global, Sequoia Capital and Lightspeed, have previously called on the Indian government to accelerate rules that would allow companies to list overseas for better access to capital. “It’s not that the Indian markets are inadequate. It’s providing another option and it’s important also not to just look at it from the point of view of the entrepreneur, but also the venture capitalist,” Knight said.

(Reporting by Dhwani Pandya; editing by Jane Merriman/Mark Heinrich)