The government on Wednesday allowed direct listing of securities by public Indian companies on the international exchanges of GIFT International Financial Services Centre (GIFT-IFSC), and made the requisite provisions to provide “an overarching regulatory framework” to facilitate it. In July, Finance Minister Nirmala Sitharaman announced that the government had decided to enable direct listing of listed and unlisted companies on the IFSC exchanges. The move is expected to give Indian companies access to cheaper foreign capital, boost foreign investment, and broaden investor.
The Department of Economic Affairs of the Finance Ministry has amended Foreign Exchange Management (Non-debt Instruments) Rules, 2019, and notified the Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme. Additionally, the Ministry of Corporate Affairs (MCA) has issued 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. SEBI (Securities and Exchange Board of India) is in the process of issuing the operational guidelines for listed public Indian companies,” the Finance Ministry said in a statement.
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The international stock exchanges at GIFT-IFSC—India International Exchange and NSE International Exchange—are currently prescribed as the permitted stock exchanges. These exchanges are under the regulatory supervision of the International Financial Services Centres Authority (IFSCA). GIFT-IFSC is India’s first international financial services centre set up with the objective of connecting India with global opportunities while helping the Indian economy connect with the global financial system and facilitating seamless flow of global capital into India.
“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. 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,” the Finance Ministry said.
Public Indian companies will have the flexibility to access both markets—domestic for raising capital in rupees and international market at IFSC for raising capital in foreign currency from the global investors.
“This initiative will particularly benefit Indian companies going global and having ambitions to look at opportunities for expanding their presence in other markets. It is also expected to provide a boost to the capital market ecosystem at GIFT IFSC by provision of new investment opportunities for investors, diversification of financial products and by enhancing liquidity,” the ministry said.
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According to the government, it is not mandatory for an unlisted company intending to list on international exchanges to also list on domestic exchanges. However, there is no restriction on such companies to opt for listing on domestic as well as international exchanges. The equity shares listed on international exchanges will be counted towards the foreign holding of the company. Also, public companies falling under sectors prohibited for Foreign Direct Investment (FDI) will not be allowed to issue shares under this scheme.
Indian residents will not be allowed to trade or invest in shares of Indian companies on international exchanges. Non-resident Indians (NRIs), however, will be allowed to trade. Individuals and entities from countries sharing a land border with India will also be allowed to trade, subject to approval from the government.