Govt allows direct listing of shares of Indian firms on GIFT City's exchanges

According to a notification from the finance ministry, the eligible exchanges for this initiative are India International Exchange and NSE International Exchange.

The notification follows Finance Minister Nirmala Sitharaman's statement at the Vibrant Gujarat Global Summit earlier in the month, where she stated that the government was actively engaged in the systematic process of enabling direct listing of stocks at GIFT IFSC (International Financial Services Centre).

On January 11, Sitharaman expressed confidence that it would happen at the earliest, underscoring that Indian companies should then be able to access global funds easily.

In late October 2023, the corporate affairs ministry had announced that specific classes of public companies could directly list on foreign stock exchanges, following Sitharaman's earlier declaration in July 2023.

Today, the corporate affairs ministry issued the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024.

"These, together, provide an overarching regulatory framework to enable public Indian companies to issue and list their shares in permitted international exchanges. As of now, the framework allows unlisted public Indian companies to list their shares on an international exchange," the finance ministry said in a statement, adding that the Securities and Exchange Board of India (SEBI) is "in the process" of issuing the operational guidelines for listed public companies.

The start of the direct listing of Indian companies' shares on GIFT City exchanges is the first phase of enabling them to list overseas.

In September 2023, at the conclusion of the 12th India-UK Economic and Financial Dialogue, the government announced that it would explore the potential for direct listings on the London Stock Exchange.

So far, Indian companies were not allowed to directly list on overseas markets, relying instead on depository receipts such as American Depository Receipts (ADRs) or Global Depository Receipts (GDRs).

According to the notification dated January 24, amending India's Foreign Exchange Management (Non-debt Instruments) Rules of 2019, a public Indian company is authorised to issue shares on the specified exchanges.

However, this is subject to the condition that neither the company nor any of its promoters, promoter group, directors, or selling shareholders are prohibited from accessing the capital market.

Further, it is required that none of the promoters or directors of the company are associated as promoters or directors with another Indian company that is barred from accessing the capital market.

Among the eligibility criteria, it is specified that promoters or directors should not be categorized as wilful defaulters or fugitive economic offenders.

"This policy initiative...will reshape the Indian capital market landscape and offers Indian companies, especially start-ups and companies in the sunrise and technology sectors, an alternative avenue to access global capital beyond the domestic exchanges," the finance ministry said.

"This is expected to lead to better valuation of Indian companies in line with global standards of scale and performance, boost foreign investment flows, unlock growth opportunities and broaden the investor base," it added.

Pantomath Capital Advisors Pvt Ltd. MD Mahavir Lunawat, who is also a member of the Working Group on IFSC Direct Listing of Listed Indian Companies on IFSC Exchanges, said, "Direct Listing at IFSC enables corporates seeking cross-country capital raising to tap cross-listings, primarily for substantial finance, which in turn can seize expansion opportunities both domestically and internationally. This has been hugely facilitated by the rapid market liberalisation and greater integration of global securities market. This decision aims to further propel the transformation of IFSC into a thriving global financial hub. This will provide access to global capital and result in wider capital formation for the Indian business enterprises.”