A new report from the India-UK Financial Partnership (IUKFP) – the leading forum for financial services cooperation between India and the UK – sets out how the two countries can strengthen equity capital markets connectivity by enhancing the current listings regime between the Indian and UK stock exchanges, allowing equity share cross-listings.
The report, ‘Catalysing bilateral growth: Connecting India and the UK’s equity capital markets’, proposes a series of recommendations to realise this vision, including urging policymakers to allow and enable Indian companies with a primary listing on India’s National Stock Exchange (NSE) and/or Bombay Stock Exchange (BSE) to obtain a secondary listing on the London Stock Exchange and vice versa.
Traditionally, Depositary Receipts (DRs) have been used by Indian companies for raising international equity capital and overseas secondary listings, but they have become less popular over the last decade. Recent regulatory changes, such as India's new rules for international equity listings in certain permitted jurisdictions and the UK's new International Secondary Listing segment, have paved the way for direct equity share cross-listings between both countries.
The report recognises the various challenges that will need to be addressed to realise this vision, not least relating to differences in regulations, accounting standards, taxation, prospectus content, definitions and the cross-border trading and settlement of equity shares. However, it also highlights the significant potential its successful implementation would offer to the growth ambitions and equity strategies of Indian and UK-based companies, as well as the potential for it to serve as a base case arrangement for IPOs by unlisted and private companies in either market.
The IUKFP has identified several key recommendations for policymakers and regulators in India and the UK to take forward, covering areas such as regulatory requirements, market infrastructure considerations, taxation, accounting, auditing standards, and settlements. These include:
- Amending Indian regulations to permit equity share cross-listings, including the UK as a permitted jurisdiction and the London Stock Exchange as a permitted stock exchange.
- Permitting equity shares issued by UK listed companies to list on Indian stock exchanges.
- Empowering regulators to approve foreign listing prospectuses, allowing the UK's Financial Conduct Authority (FCA) and India's Securities and Exchange Board (SEBI) to review and approve prospectuses for cross-listings.
- Allowing London listed companies to report in International Financial Reporting Standards (IFRS) and international auditing standards for equity share listings on Indian exchanges.
- Aligning capital gains tax treatment with existing norms to avoid double taxation.
- Harmonising significant beneficial ownership disclosure thresholds for Indian companies obtaining a secondary listing in London.
- Permitting omnibus account structures for cross-border settlement.
- Developing direct settlement of shares in India and the UK.
Full recommendations can be found in the report.
Bill Winters, UK Chair of the IUKFP and Group Chief Executive, Standard Chartered, said, “The UK and India continue to focus on strengthening their financial ties. Recent regulatory innovations in both countries have created the opportunity to enhance capital market connectivity through equity share cross listings between our respective stock exchanges. The recommendations laid out in the report provide practical steps to help support capital raising and investment between the two countries with the aim to further build market connectivity, foster sustained growth, and position the UK-India financial corridor as a leading example of global partnership.”
Uday Kotak, India Chair of the IUKFP and Founder and Director, Kotak Mahindra Bank Ltd said “India and the UK have a long-standing economic relationship, with the UK being one of India's largest trading partners. The IUKFP is dedicated to strengthening financial ties between our two countries, promoting collaboration and innovation in the financial sector to drive economic growth and development. To move forward on the recommendations set out in this report, collaboration between regulators, industry participants, and policymakers will be essential. There will be challenges to overcome, but the benefits for companies and investors in India and the UK will be significant.”
As the secretariat for the IUKFP, TheCityUK and Kotak Mahindra Bank will continue to support the IUKFP through the implementation of this work to drive further growth in mutual trade and investment between the two countries.
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