According to a report by Reuters, India has halted plans to allow local firms to list overseas as it seeks to strengthen its capital markets, dealing a blow to foreign funds and stock exchanges looking to capitalize on the country’s tech boom.
Three senior government officials with direct knowledge of the decision told Reuters that the plan had been put on hold because India believes there is enough depth in local capital markets for firms to raise funds and get good valuations. They declined to be identified because the move had not been made public.
Indian equity markets have flourished as enthusiastic retail investors and a pandemic-induced overflow of easy money drove prices to all-time highs, encouraging a slew of Indian tech founders to go public in India (IPOs).
In 2021, more than 60 companies made their market debut in India, raising more than $13.7 billion, which was more than the past three years combined. Russia’s invasion of Ukraine has roiled Indian stocks, as it has other global markets, and the volatility has caused IPOs to be postponed.
However, the outlook for such listings has dimmed after Paytm, a digital payments app backed by China’s Alibaba and Ant and Japan’s Softbank, plunged on its debut in November, stoking fears about valuations. Its stock has dropped by 75% since its IPO.
Even before Paytm’s demise, US venture capitalists such as Tiger Global and Sequoia Capital lobbied Prime Minister Narendra Modi to allow Indian firms to list abroad in order to achieve higher valuations, according to Reuters.
A second government official stated that the overseas listing rules were now in “limbo,” and both officials cited the stock market debut of food-delivery giant Zomato, which clocked a high valuation, as attributing to the change of heart.
Zomato went public on the Mumbai stock exchange in July, and its offer was 38 times oversubscribed, resulting in a 66 percent increase in its stock price. And Nykaa, an Indian cosmetics-to-fashion platform, soared 96 percent on its initial public offering, reaching a valuation of nearly $14 billion. Both have given up a significant portion of their gains in recent months.
Two industry sources briefed by government officials also said the plan had been put on hold, a setback for exchanges in New York and London that had been vying for a piece of India’s rapidly growing start-up economy.