What changed
Previously, unlisted Indian companies that had not accessed the ADR/GDR/FCCB route needed prior or simultaneous listing in the domestic market. Now, for a two-year period starting from the government notification date, unlisted companies can raise capital abroad without that requirement, subject to conditions like listing on IOSCO/FATF-compliant exchanges and compliance with FDI norms.
What it means for you
This opens a new fundraising avenue for unlisted Indian firms, potentially increasing cross-border capital flows and demand for ADR/GDR services. Banks must ensure compliance with reporting and repatriation rules, as unlisted companies must park repatriated funds only with AD Category-I banks and use them for eligible purposes.
What you must do
- Update internal policies to handle ADR/GDR issuances by unlisted companies without domestic listing requirement.
- Ensure repatriated funds are parked only with AD Category-I banks and used for eligible purposes within 15 days.
- Advise clients on conditions: listing on IOSCO/FATF-compliant exchanges, sectoral caps, pricing norms, and downstream investment rules.
- Monitor reporting requirements under FEMA Notification No. 20 for unlisted companies raising funds abroad.
Who it affects
AD Category-I banks, Unlisted Indian companies seeking foreign capital, Custodians handling ADR/GDR underlying shares
Can unlisted companies now raise funds abroad without any domestic listing?
Yes, for a two-year period from the government notification date, unlisted Indian companies can raise capital abroad via ADRs/GDRs without prior or subsequent domestic listing, subject to conditions like listing on IOSCO/FATF-compliant exchanges and FDI norms.
What happens if the funds raised abroad are not used overseas?
The company must repatriate the funds to India within 15 days and park them only with AD Category-I banks. These funds can then be used for eligible purposes as per RBI guidelines.
Are there any restrictions on where the ADRs/GDRs can be listed?
Yes, the unlisted company must list abroad only on exchanges in IOSCO/FATF-compliant jurisdictions or those with which SEBI has signed bilateral agreements.