Startups, VCs push for direct overseas listing of Indian startups in letter to PM Modi

Startups, VCs push for direct overseas listing of Indian startups in letter to PM Modi
Narendra Modi  |  Photo Credit: Reuters

From unicorns such as Byju’s, Swiggy, Cred, Bharat Pe, and Urban Ladder to heads of several investment firms, who have invested in Indian startups, stakeholders in the ecosystem have come together to urge PM Narendra Modi to allow direct overseas listing of companies based in India. 
Calling it the “single most significant big bang reform for the start-up ecosystem”, the letter, signed by 22 signatories, argued that an overseas direct listing would raise the profile of these startups, make greater capital pool available to them and allow specialised investors to invest in these companies -- especially in sectors such as Software as a Service (SaaS), InsureTech (insurance technology), Business to Business (B2B) logistics, Genomics and Biotechnology.  

“If India wants to produce multinational tech giants, permitting our startups to access global capital by listing on international exchanges is an absolute must-have,” says the letter dated 29 July. 

The names include Tiger Global Management partner Scott Shleifer, Falcon Edge co-founder and partner Navroz D Udwadia, Norwest Venture Capital Partner Niren Shah, Lightspeed India partner Bejul Somaia, Matrix Partners India Managing Director Vikram Vaidyanathan, Sequoia Capital India Partner Rajan Anandan, Elevation Capital Partner Ravi Adusumalli, and Nexus Venture Partners Jishnu Bhattacharjee.  

Inability to list is a major impediment to the growth ambitions of startups and also a reason why many of them are moving their base overseas, reads the letter. VCCircle has seen a copy of the letter, which also notes that overseas listing would encourage more foreign investors to back start-ups. 

The start-ups and the investors allow that many companies may still prefer a domestic listing as they would gain wider home brand recognition, allow for ‘research coverage, trading liquidity, ease of investor relations, lower litigation risk, and lower listing and ongoing compliance costs’.  

Many consumer-facing Indian start-ups such as Nykaa and Policy Bazaar have filed for an Indian listing in the last month. This also comes just weeks after decacorn food delivery company Zomato, which is a competitor to Swiggy, went public in India after outweighing the benefits of a domestic listing against an overseas one. CarDekho, another signatory, is a competitor to CarTrade which is listing in India.  

The letter argues that many tech start-ups are building products and services that compete globally, which is the reason why an overseas listing would allow these firms to compete with larger firms listed in the US and Singapore. The Economic Times was the first to report this development. 

A start-up founder, who signed the letter, told VCCircle on condition of anonymity that they do expect the Indian government to allow for international listing eventually, but hoped that this letter would speed up the process.  

The letter, which has 22 signatories, also notes that the government "showed intent to allow direct overseas listing" in September 2020 and allowed for some exemptions in  February 2021 for Indian firms listing overseas. 

"However, any further progress to enable direct overseas listing is still awaited. Therefore, we are writing with a request to kindly move forward with this unfinished reform agenda and expedite the steps required for turning overseas direct listing into a reality," the letter states.  

Start-ups that signed the letter include Network, Rebel Foods that owns the brand Faasos, Urban Company, Stanza Living, Cardekho, OfBusiness, Unacademy, and Infra.Market. 

Gautham Srinivas, Partner at Khaitan & Co said that an overseas direct listing regime would need to be in sync with an Indian regulations  so that stakeholders have all options available to them. 

“Questions would need to be addressed on exchange control laws, taxation aspects, and other aspects are to be worked upon while building such a framework,” he said. “All checks and balances from an Indian regulatory perspective needs to be examined and balanced with commercial considerations for businesses which are exploring an overseas listing option,” he added.