Indian companies can now list directly on GIFT City’s international exchanges

The finance ministry on Wednesday notified direct listing of Indian companies on GIFT City’s exchanges, a move expected to enable startups and unlisted companies access global capital.

Indian companies can now list on the financial hub’s India International Exchange and NSE International Exchange at Gandhinagar, the ministry said. 

“This policy initiative, to enable listing of Indian companies in GIFT-IFSC, will reshape the Indian capital market landscape and offers Indian companies, especially startups and companies in the sunrise and technology sectors, an alternative avenue to access global capital beyond the domestic exchanges,” the finance ministry said in a statement. 

The markets regulator will issue operational guidelines, it added.

The government recently amended the Companies Amendment Act 2020 to allow a specified class of securities, issued by certain public companies, to be listed on stock exchanges in permitted foreign jurisdictions. 

Such listings are for now limited to the International Financial Services Centre at the Gujarat International Financial Tech-City.

The ministry of corporate affairs has issued rules for governing the listing of equity shares in permissible jurisdictions, where it has specified that Nidhi companies, companies having negative net worth, and those having outstanding deposits from the public, will not be eligible for listing.

These rules together will provide an overarching regulatory framework to enable public Indian companies to issue and list their shares in permitted international exchanges, the finance ministry said. 

The latest notification also allows Indian companies the flexibility to access both the domestic and international markets for raising capital in rupees and foreign currency.

“This initiative will particularly benefit Indian companies going global and having ambitions to look at opportunities for expanding their presence in other markets,” the finance ministry said. 

The move follows finance minister Nirmala Sitharaman’s remarks in September on permitting Indian companies to undertake direct foreign listings. 

“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.

Yashojit Mitra, partner, Economic Laws Practice, said companies may not immediately rush to list on the GIFT City exchanges. “The IFSC exchanges are still in their nascent stage and companies will take a little time to warm up to these exchanges,” he said. 

The notification, however, is a positive move in promoting IFSC as a global financial hub, Mitra said. GIFT-IFSC was established in 2015 as a special economic zone and international financial hub.

Mahavir Lunawat, managing director at Pantomath Capital Advisors, said direct listing on GIFT City’s exchanges will enable companies seeking cross-country capital-raising to tap cross-listings, primarily for substantial finance, which in turn would allow them to seize expansion opportunities both in India and abroad. 

“This has been hugely facilitated by the rapid market liberalisation and greater integration of the global securities market. This decision aims to further propel the transformation of IFSC into a thriving global financial hub,” said Lunawat, who is also a member of the Working Group on IFSC Direct Listing of Listed Indian Companies on IFSC Exchanges.