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Last year, the landscape of IPO opportunities for ambitious, growth-hungry Indian companies was dramatically changed when the Direct Overseas Listing Policy was introduced.

Currently, the direct listing of securities by Indian companies is allowed; however, not without hurdles which the Indian government are taking into consideration. The Indian government has been in talks about amending legislations to ensure a smooth transaction of stock exchange outside of the country.

The listing of Indian entities in foreign stock exchanges will likely increase India’s competitive edge in what is already a rapidly growing economy. India added 54 unicorns in 2021 alone, and as the City of London attracts so much domestic and international capital, it is expected that many of these unicorns and ‘soonicorns’ will go public in the UK.

London’s track record of supporting Indian companies

The London Stock Exchange has a strong historic legacy of supporting Indian companies. Since the mid 1990’s, 71 Indian companies have tapped London’s equity markets and raised £8.5bn ($14.5 bn). However, India has also had rigid control of its domestic superstar startups, only allowing them to go public in India.

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It is not just unicorns that are creating excitement in the London market either – Jaguar Land Rover, part of India’s Tata Motors, may also list in London in 2022, although according to broker IG, “optimism surrounding JLR’s IPO has dwindled as a result of declining diesel sales, a drop in Chinese demand, and more recently, the coronavirus crisis.”

Scrapping India’s controls would not only provide a further boost for Indian companies by reaching a wider base of investors with deeper pockets; but more importantly, it would benefit the City of London, its stock exchange, and ultimately, the UK at large – further cementing it as the international hub of tech IPOs.

“Startups in India have gone from strength to strength, receiving record-breaking capital and transforming this into both growth and returns on investors’ capital – ultimately producing 54 unicorns in 2021 alone,” explains Nayan Gala, founder of JPIN, an investment bank for start ups.  “It is great news for these ambitious companies that the Modi Government will be looking to loosen the restrictive laws around IPOs, as international IPOs mean more international investors, and therefore more investors in general.”

London is the world’s most international stock exchange, with nearly 40% of its listed companies being from outside the UK. 2021 saw a record year for IPOs since 2014, with the LSE being the largest IPO hub behind the US and China.

India’s massive startup ecosystem

India has the world’s third largest startup ecosystem, and 2021 saw them raise $16.9 billion of capital – second only to China. With so much capital, and a government enthusiastic and sympathetic to small businesses and their abilities to grow and innovate, it is likely this string of successful startups will only continue.

“The UK will benefit too, as many of these startups will look to go public in London – providing a boost to publicity, stock volume, and therefore stock value, as well as the firms that service these listings,” says Gala at JPIN. “There is also an increased chance that these companies may expand into the UK after their (hopefully) successful listing – again, giving the UK a further boost.”

Related

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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