Norms Eased For Direct Global Listing For ‘Gift’

The central government on Wednesday decided to allow domestic public companies to directly issue and list their shares on global exchanges based at the International Financial Services Centre (IFSC) in Gujarat's Gift City, which is considered a foreign jurisdiction. 

The finance and corporate affairs ministries have notified the new regulatory framework, making it easier for Indian startup unicorns and other entities, especially those in the sunrise and technology sectors, to gain access to a larger pool of foreign capital. 

However, Indian residents are not allowed to undertake share transactions on IFSC exchanges, as they are only meant for foreign investors and non-resident Indians.

The Securities and Exchange Board of India (Sebi) is currently developing operational guidelines for allowing listed Indian public companies to directly list on the India International Exchange and NSE International Exchange. Previously, Indian companies were only able to access overseas equity markets through depository receipts such as American Depository Receipts and Global Depository Receipts after they went public in India. 

This new framework will allow unlisted public companies to list their shares on these bourses, which is expected to lead to a better valuation of Indian companies, boost foreign investment flows, unlock growth opportunities and broaden the investor base, in line with global standards of scale and performance.

It is important to note that any capital gains that arise from the transfer of equity shares of companies listed on the IFSC exchanges are already exempt from tax. A public company, whether listed or unlisted, is a company that has a wider shareholder base and a minimum share capital and is not incorporated as a private company. According to the rules, public companies must have at least seven shareholders and three directors, and a minimum authorized share capital of 1 lakh.

As per the current framework, government approval will be required for domestic companies with shareholders from neighbouring countries like China, with which India shares a land border, if they intend to list on the IFSC exchanges.

Companies seeking to list on the stock exchange at Gift City must ensure that they, their promoters, directors and shareholders have not been debarred from accessing the capital market by the regulator. Promoters and directors of the company must not be wilful defaulters or fugitive economic offenders, among others. It is important to note that companies operating in the prohibited sectors under the foreign direct investment (FDI) regime are not eligible to list under this framework.

Furthermore, equity shares listed on international exchanges will be counted towards the foreign holding of the company and subject to the sector-specific FDI limit. Ankit Singhi, head of corporate affairs and compliance at Corporate Professionals, explains that foreign investors may find the tax incentives offered at Gift City attractive for investment purposes. However, it is worth noting that Indian residents are restricted from trading shares on the stock exchange at Gift City.