Centre allows direct listing of securities by Indian companies on international exchanges of GIFT IFSC

The Department of Economic Affairs (DEA) under the Ministry of Finance has amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 and notified the direct listing of equity shares of companies incorporated in India on the international exchanges scheme. As per a notification from the finance ministry, the eligible exchanges are the India International Exchange and the NSE International Exchange. The notification comes less than a fortnight after Finance Minister Nirmala Sitharaman had said at the Vibrant Gujarat Global Summit earlier this month that the government was going through the process of direct listing of stocks in GIFT IFSC in a “very systematic manner”. “And I am confident it will happen at the earliest. With that, Indian companies should be able to access global funds easily,” Sitharaman had said on January 11. Earlier, in late October 2023, the corporate affairs ministry had said certain classes of public companies can directly list on foreign stock exchanges after Sitharaman had announced the same in July 2023. Today, the corporate affairs ministry also issued the 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,” the finance ministry said in a statement, adding that the Securities and Exchange Board of India (SEBI) is “in the process” of issuing the operational guidelines for listed public companies. The direct listing of Indian companies’ shares on GIFT City exchanges is the first step in allowing them to list overseas, with the government saying in September 2023 at the end of the 12th India-UK Economic and Financial Dialogue that it was exploring the possibility of direct listing on the London Stock Exchange. Until now, Indian companies have not been permitted to list directly overseas markets, and instead use depository receipts — American Depository Receipts or Global Depository Receipts — to do so. As per the January 24 notification, which amended India’s Foreign Exchange Management (Non-debt Instruments) Rules of 2019, a public Indian company is permitted to issue shares on the aforementioned exchanges if it, any of its promoters, promoter group, directors, or selling shareholders are not debarred from accessing the capital market. Further, none of the promoters or directors of the company should be a promoter or director of another Indian company which is debarred from accessing the capital market. Some of the other eligibility criteria include promoters or directors not being wilful defaulters or fugitive economic offenders. “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,” the finance ministry 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.