Startup founders, VCs write to PM Modi asking for direct overseas listing
The joint letter from unicorn founders, marquee VCs and others impressed upon the PM on the value creation Indian startups would have if they are allowed to list directly on foreign stock exchanges
Founders of homegrown startups like BYJU'S, Cred, Urban Company and BharatPe have jointly written to Prime Minister Narendra Modi, urging the government to allow direct overseas listing of Indian companies.
In their letter, the founders pointed out that the current inability of unlisted companies to tap international markets for raising capital is "an impediment to the growth ambitions of Indian startups, as their access to wider global pools of capital is blocked".
"As a result, most Indian start-ups do not have a level-playing field with their counterparts in other global startup hubs. It is also a factor resulting in the migration of startups outside India, or flipping as we term it, with many of them moving their base overseas," the letter added.
The letter was signed by Rebel Food's Jaydeep Barman, BYJU'S founder Byju Raveendran, Cred's Kunal Shah, Urban Company's Abhiraj Singh Bhal, and Matrix Partners India MD Vikram Vaidyanathan, among others.
The entrepreneurs emphasised that such a move will be the single most significant, big-bang reform for the startup ecosystem, and will instantly pave the way for many Indian companies to be on the global map.
The founders contended that if India wants to produce multinational tech giants, "permitting Indian startups to access global capital by listing on international exchanges is an absolute must-have".
The letter pointed out that in 2021 alone, India has added 18 unicorns (companies valued at more than $1 billion), taking the tally to 55.
Given this trend of fast-paced growth, many such mature companies are now keen to tap stock markets to raise further capital, as it will allow them to fuel their domestic and international expansion, generate employment and make India more efficient and competitive, they said. The startups also pointed out the benefits of overseas listing, including the availability of a greater capital pool.
The total market capitalisation of all the companies listed in India is about $3 trillion, while that comparable number for the US is $50 trillion, it said, adding that US companies raise several times more capital than is raised in Indian capital markets each year.
"International stock exchange listings will also help raise the profile of Indian startups, helping them compete on a global stage with startups from other countries," the founders said.
The companies noted that concerns that enabling international listing will dampen the development of the domestic capital market are unfounded.
“Even when international listing is permitted, many companies will continue to prefer listing on domestic exchanges because of home market advantages, including home brand recognition, wide research coverage, trading liquidity, ease of investor relations, lower litigation risk, and lower listing and ongoing compliance costs," it said.
However, the option to list overseas will provide a new avenue for certain categories of tech companies that may benefit from an international listing.
Interestingly, food delivery app Zomato made a stellar debut on the Indian stock market last month. A number of tech-led businesses, including Paytm, are looking at a potential listing on Indian bourses.
The letter said that in September 2020, the government had showed intent to allow direct overseas listing of Indian companies by amending the Companies Act, 2013.
In another step, in February this year, Indian companies listed overseas were exempted from several obligations applicable to domestically listed companies, it added.
Copies of the letter were also sent to Finance Minister Nirmala Sitharaman, Commerce and Industry Minister Piyush Goyal, and Electronics and IT Minister Ashwini Vaishnaw.
Edited by Anju Narayanan
