There are many reasons why Indian companies are attracted to being listed on the Frankfurt Stock Exchange. A comparison of the liquidity situation of the different international stock exchanges has shown that, in general, liquidity in stock trading in Frankfurt is significantly higher. Greater liquidity through higher trading volumes is a good basis for a fair valuation of a company on the capital markets.
In addition to the above, the approved indices of the Frankfurt Stock Exchange increase the visibility of Indian companies and attract the attention of Indian and European investors alike. In Germany, Indian companies come together with analysts with expertise in a specific sector, especially in those sectors where Germany is particularly strong.
Companies can access investors all over the world through the Xetra trading platform of the Frankfurt Stock Exchange. Currently, a total of over 250 trading members are listed on XETRA.
Furthermore, the Frankfurt Stock Exchange offers a range of market segments which allow issuers to choose the market segment that best suits them, taking into account access criteria, post-admission obligations and the objectives pursued by the listing. The listing procedure at the Frankfurt Stock Exchange is one of the fastest in the world and the listing fees are highly attractive compared to other international Frankfurt Stock Exchange competitors.
Choice Of Market Segments On The Frankfurt Stock Exchange Issuers at the Frankfurt Stock Exchange can choose between the Regulated Market (General Standard/ Prime Standard) and the stock exchange only-regulated Open Market (First/Second Quotation Board and Entry Standard). In principle, access to the Regulated Market is only possible with a securities prospectus approved by the supervisory authority in the issuer's home member state within the European Economic Area (EEA). Moreover, issuers in the Regulated Market are subject to the post-admission obligations of the EU Transparency Directive as implemented in German law. As regards post-admission obligations, the Prime Standard offered by the Frankfurt Stock Exchange to its issuers is a quality segment that imposes even stricter requirements on issuers than the EU Transparency Directive.
Admission to the Open Market (First Quotation Board and Entry Standard segments) does not in require a securities prospectus. In this respect and in comparison to some European competitors requiring a document similar to a prospectus for admission to their stock exchange regulated market segments, the Frankfurt Stock Exchange provides easier, faster and less costly access to capital markets, especially as the drafting of a securities prospectus or comparable document is both time consuming and costly for the issuer.
Whereas no post-listing obligations have to be observed for the First Quotation Board segment listing, issuers for the Entry Standard undertake to comply with certain post-listing reporting requirements.
Particularities In Connection With Indian Issuers One specific concern for Indian issuers is that, according to Indian law, a direct listing of shares of an Indian company on a foreign stock exchange is not possible. A direct admission would be conceivable only via a holding structure if the holding (and issuer of the shares to be admitted) has its registered office outside of India and only the operational companies are located in India.
However, Indian companies (which already have their shares listed on a stock exchange in India) could access foreign equity capital markets through a depositary receipts mechanism. As well as the Frankfurt Depositary Receipt Program (Frankfurt GDR), the ADR and GDR programs may also be admitted for trading on the Frankfurt Stock Exchange.
Equivalent To Indian GAAP
It is always a matter of considerable importance to companies to establish the accounting standards by which their historical financial information to be disclosed in the securities prospectus is to be declared. If Indian issuers are obliged to draft a prospectus for listing on a Regulated Market on the Frankfurt Stock Exchange or a public offering of their securities, the historical financial information which it is mandatory to incorporate into the securities prospectus has to be prepared in accordance with IFRS or an equivalent accounting standard. Through Commission Regulation (EC) No. 1289/2008, the GAAP of the People's Republic of China, Canada, the Republic of Korea and the Republic of India were recognized as equivalent for financial years beginning prior to 1 January 2012, as well as Japanese and US GAAP. This removed an obstacle to accessing the EEA's capital markets for companies reporting according to these accounting standards, thus further increasing the attractiveness of EEA capital markets.
However, this exemption is provided only for Indian issuers aiming to become listed on the Frankfurt Stock Exchange through a Depositary Receipt Program. Companies which aim to become listed at the stock exchange through a foreign holding ultimately have to observe the accounting rules which apply to the state where their holding has its registered office and the (non-Indian) state of registration is unlikely to permit accounting practice according to Indian GAAP. If the state of registration is within the EEA, the financial information has to be prepared in accordance with IFRS or, if a securities prospectus is drafted for a public offering on the Open Market, in accordance with IFRS or the local GAAP of the EEC member state of registration.
There are many good reasons for an Indian company to choose the Frankfurt Stock Exchange. Interested companies are welcome to contact us to discuss being listed on the Frankfurt Stock Exchange and the choice of market segment suitable for particular company.
