India allows direct listing of Indian companies on international exchanges of GIFT IFSC

On July 28 last year, Finance Minister Nirmala Sitharaman made an announcement regarding the direct listing of Indian Companies at GIFT- IFSC exchanges in the first phase.

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

It further said the initiative will boost foreign investment flows, unlock growth opportunities and broaden the investor base for Indian companies.

At present, the framework allows unlisted public Indian companies to list their shares on an international exchange.

The Securities and Exchange Board of India (Sebi) is in the process of issuing operational guidelines for listed public Indian companies.

International stock exchanges at GIFT-IFSC – India International Exchange and NSE International Exchange – have been prescribed as permitted stock exchanges.

These exchanges are under the regulatory supervision of the International Financial Services Centres Authority (IFSCA).

This policy initiative to enable the listing of Indian companies in GIFT IFSC will reshape the Indian capital market landscape and offers Indian companies, especially start-ups and firms in the sunrise and technology sectors, an alternative avenue to access global capital beyond the domestic exchanges, the statement 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.

The public Indian companies will have the flexibility to access both markets — the domestic market for raising capital in INR and the international market at IFSC for raising capital in foreign currency from global investors, it noted.

This initiative will particularly benefit Indian companies going global and having ambitions to look at opportunities for expanding their presence in other markets, it said, adding that 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 enabling provisions of the Companies (Amendment) Act, 2020, were accordingly brought into force with effect from October 30, 2023.

The government on November 1 permitted Indian companies to list on foreign exchanges, subject to certain conditions.

Subsequently, the corporate affairs ministry notified the relevant section under the company’s law in this regard.

Currently, overseas listings by local listed entities are carried out through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).

"In exercise of the powers conferred by sub-section (2) of section 1 of the Companies (Amendment) Act, 2020 (29 of 2020), the Central Government hereby appoints the 30th day of October 2023 as the date on which the provisions of section 5 of the said Act shall come into force," the ministry said in a notification on October 30.

The rules for direct overseas listing of Indian companies are yet to be notified.

Section 5 allows certain classes of public companies to list their securities on permitted stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be prescribed.