Govt To Allow Indian Companies To Directly List On IFSC In Ahmedabad: FM Sitharaman

Finance Minister Nirmala Sitharaman announced on Friday that the government has decided to allow domestic companies, both listed and unlisted, to directly list their equity shares on the International Financial Services Centre (IFSC) in Ahmedabad. She said during the opening of the Corporate Debt Market Development Fund (CDMDF) and AMC Repo Clearing (ARCL) that the decision will improve access to global finance and result in a higher valuation of Indian enterprises.

“I had said in May 2020 that direct listing of securities by Indian public companies would now be permissible in foreign jurisdictions. Now, I am pleased to announce that the government has taken a decision to enable the direct listing of listed and unlisted companies on the IFSC exchanges,” Sitharaman said.

The facility will be operational soon, allowing start-ups and similar businesses to get access to the worldwide market via GIFT IFSC.

The country’s current regulatory structure prohibits the direct listing of equity shares of Indian-incorporated corporations on foreign stock exchanges. The only ways for corporations formed in India to access global equity capital markets are through the American Depository Receipts (ADR) and Global Depository Receipts (GDR) regimes.

In 2018, a Sebi-appointed expert committee presented proposals for listing domestic company equity shares on overseas exchanges.

Highlighting the reforms undertaken by the government over the last few years, Sitharaman said, “One of the major steps that the government has taken is to consolidate the laws dealing with the securities market in the country into a single Securities Market Code.”

“This is vital as it is intended to consolidate the three different laws – the SCRA (Securities Contracts (Regulations) Act) of 1956, Sebi Act of 1992 and the Depositories Act of 1996 – into a single Act with updated and rationalised provisions,” she added.

The Code is intended to be future-ready, taking into account long-term developments and promoting ease of doing business, according to the finance minister, adding that it will cater to the developmental and regulatory needs of the country's capital market, which is experiencing rapid growth.

“A lot of groundwork has already been done and I expect this new Code to become a reality soon,” she added.

Sitharaman further said that at this stage of our economic development, the main focus of our financial sector regulations should be the development of the market and also investor protection.

For a vibrant financial sector, during Amrit Kaal, the country’s regulatory architecture should set global benchmarks with regulations that are flexible, effective and proportionate and do not stifle innovation, the finance minister said.

On the development, Jyoti Prakash Gadia, Managing Director at Resurgent India believes that the launching of the new debt market development fund and a separate platform for trading debt instruments is a positive step indicating the pro-active and pragmatic approach of the Government to facilitate the creation of fresh avenues of resources and stronger financial markets.

The announcement relating direct listing of Indian companies on International Financial Services Centres will widen the scope of procurement of funds from abroad more efficiently and cost-effectively, Gadia added.

Whereas, Sitharaman also said that the regulatory environment should try to balance at all times the creation of a conducive environment for starting and running businesses. The trinity which is important for all of us is — the creation of a conducive environment for starting and running businesses, the maintenance of market integrity and sustenance of market stability, the finance minister said.

“I would think that this can be the possible trinity with which we can take the financial domain, markets, the regulators, the government, policymakers and the legislators to look forward for a robust market system, which will take us forward for a development India,” she added.