Easier foreign fundraising for unlisted firms- 28.08.2019

Unlisted Indian companies could soon find it easier to raise capital overseas through depository receipts. The Securities and Exchange Board of India (Sebi) is planning a liberalized regime for the issue of global depository receipts (GDRs) and American depositary receipts (ADRs) that will help startups and others raise funds, said two people with the direct knowledge of the matter.

Currently, only listed companies can issue the instruments. The regulator is also expected to ease norms pertaining to two-way fungibility — conversion of shares to depository receipts and vice versa.

FM Nirmala Sitharaman had announced last week that Sebi will soon operationalize the Depository Receipt Scheme 2014, a framework that was approved five years ago but hasn’t been implemented.

    1. This will be a big positive step for unlisted companies.

    2. The companies will get foreign investment which helps them to grow in size.

    3. The ADR will be listed in foreign exchanges. So tracking performance of unlisted entity will become easy.

    4. The FPIs investment will bring liquidity in the unlisted companies.