Dual listing not possible without full convertibility: Experts
India will have to amend host of laws and make rupee fully convertible before allowing dual listing of shares as is being proposed by the South African telecom major MTN.
New Delhi: India will have to amend host of laws and make rupee fully convertible before allowing dual listing of shares as is being proposed by the South African telecom major MTN.
"Dual listing is not feasible in short term as there are amendments required in FEMA to allow full capital convertibility. These are major bottlenecks," Prime Database Chairman and Managing Director Prithvi Haldea said.
Pointing out that dual listing is not popular globally, he said, "The government will have to amend Companies Act to allow dual listing, which is not allowed currently."
Expressing similar view, SMC Capital Equity head Jagannadham Thunuguntla said, "If the government is committed for dual listing, it can be feasible. However, there are huge challenges and the process will take some time."
He further said that there are many regulatory hurdles before it to become feasible. "Amendments are required in FEMA regulation, capital account convertibility, listing agreement," he added.
The dual-listed companies retain their separate legal identities while being listed on both stock exchanges. Besides, they also enjoy equal voting rights.
RBI appointed Tarapore Committee has suggested that India should go for fuller capital account convertibility in stages.
Under capital account convertibility, South African shareholders would be allowed to sell Bharti shares on their domestic exchange and it will amount to stake sale in a foreign denominated currency.
Amid merger talks between Bharti and MTN, the government recently said it is examining the issue of dual listing of the South African firm as per Indian laws. "There is a provision for dual listing of companies...
But whether this can be done under the existing laws of India, that is being examined," Finance Minister Pranab Mukherjee had said.
"The South African minister met me at the G-20 finance ministers’ meeting and there I suggested to him that this arrangement is to be looked into in the Indian context," he added.
The proposed USD 23-billion deal started in May and it involves MTN taking a 25 percent economic interest in Bharti Airtel for USD 2.9 billion plus new shares in the South African telecom, which is equivalent to 25 percent of MTN’s existing shares.
On the other hand, MTN shareholders would also get 11 percent in Bharti Airtel through GDRs that will be listed on the Johannesburg Stock Exchange.