Swadeshi Jagran Manch opposes direct listing overseas
Cautions that India will lose the right to tax gains accruing from businesses built in the country
image for illustrative purpose
New Delhi: Amid a clamour for allowing direct listing of Indian unicorns in overseas market without listing on domestic bourses, Swadeshi Jagran Manch (SJM), a wing of the Rashtriya Swayamsevak Sangh, said the remedy is worse than the disease as Indian authorities will not just lose the oversight, but also the right to tax gains accruing from businesses built in the country.
Ashwani Mahajan, National Co-Convener of SJM, that the argument that Indian capital markets lack depth has been shattered by highly successful IPOs of firms from Zomato to PayTM and Nykaa.
"Swadeshi Jagran Manch is deeply concerned to note that a huge number of unicorns, which have grown in the last one decade, have either flipped abroad or have been incorporated overseas," he said.
Flipping of an Indian company means a transaction where an Indian company incorporates a company in a foreign jurisdiction, which is then made the holding company of the subsidiary in India.
The most favourable foreign jurisdictions for Indian companies are Singapore, the United States and the United Kingdom. Most of these flipped entities have operations and primary markets in India. Nearly all have developed their intellectual property (IP) using Indian resources (human, capital assets, government support etc). These unicorns generally flip on the insistence of the foreign investors, with an objective to avoid the Indian regulatory landscape; and this process has been accentuated by the favourable policies adopted by the host countries, where these startups flip, like the US, Singapore, the UK etc, Mahajan said.
These unicorns have also been listing their shares overseas, with the assumption that valuation is higher due to deeper pools of investors in those countries, he added. "Real question is, whether this argument of lack of maturity of the Indian capital market or paucity of funds is a right argument? Lack of liquidity is being cited as the inhibiting factor in startups' funding. This argument looks misplaced. Recently, an Indian unicorn Zomato came out with an Initial Public Offer (IPO), which was oversubscribed by several times. Over 33 per cent of anchor investors in Zomato were domestic investors.
