IFSCA Allows Direct Listing In GIFT City Without IPO

The International Financial Services Centres Authority (IFSCA) has proposed a framework that allows companies to directly list their equity shares on stock exchanges in GIFT City without undertaking an initial public offering (IPO). This move is expected to provide an alternative listing route for companies that have already raised capital from founders or institutional investors but do not require immediate fundraising.

According to the proposal, companies that are not listed in India or overseas would be eligible for direct listing if they meet at least one of three financial conditions. These conditions include a minimum operating revenue of $20 million, pre-tax profit of $1 million, or a post-listing market capitalisation of $50 million.

The proposed rules aim to provide companies with an opportunity to enhance visibility, improve corporate governance standards, and provide liquidity opportunities for existing shareholders through direct listing. This is similar to the practice followed by several major global exchanges, including the New York Stock Exchange, Nasdaq, London Stock Exchange, and Tokyo Stock Exchange.

The proposal also allows companies with superior voting rights (SR) shares to opt for direct listing, provided such shares have received shareholder approval and have been held for at least three months before filing the listing application. IFSCA has proposed a simplified approval process under which companies would need to obtain in-principle approval from a recognised stock exchange within 15 days.

Following this, issuers would be required to submit an information document reviewed by a registered investment banker. The document would include key details such as business risks, capital structure, financial statements, legal disputes, related-party transactions, and management information to help investors make informed decisions.

Companies would need to provide financial statements covering at least three years, prepared under accounting standards such as IFRS, US GAAP, Ind AS, or equivalent frameworks. The statements must not be older than six months at the time of filing.

To maintain adequate market liquidity, Indian companies would need to comply with domestic minimum public shareholding requirements, while foreign issuers would be required to maintain at least 10% public shareholding after listing. Pricing of shares would be determined through an independent valuation report issued within three months of listing.

Stock exchanges would also conduct a special pre-open trading session on the first day to enable price discovery. Companies may appoint market makers to support liquidity. The proposed framework builds on provisions introduced under the IFSCA Listing Regulations, 2024, and is aimed at enhancing the attractiveness of GIFT City as a financial hub.

The move is expected to provide a boost to the Indian financial sector, particularly in the context of GIFT City, which is being developed as a major financial hub. The ability to list directly without an IPO is likely to attract more companies to list in GIFT City, which in turn could lead to increased investment and economic activity in the region.

In the broader context, this move is part of the government's efforts to develop GIFT City as a major financial hub, comparable to other global financial centers such as Singapore and Dubai. The development of GIFT City is expected to have a positive impact on the Indian economy, particularly in terms of attracting foreign investment and creating jobs.

Overall, the proposal by IFSCA to allow direct listing in GIFT City without an IPO is a significant development that is expected to have a positive impact on the Indian financial sector. It is likely to attract more companies to list in GIFT City, which in turn could lead to increased investment and economic activity in the region.

The proposal is also expected to enhance the attractiveness of GIFT City as a financial hub, making it more competitive with other global financial centers. As the Indian economy continues to grow and develop, the importance of GIFT City as a financial hub is likely to increase, and this move is expected to play a significant role in that development.

In conclusion, the proposal by IFSCA to allow direct listing in GIFT City without an IPO is a significant development that is expected to have a positive impact on the Indian financial sector. It is likely to attract more companies to list in GIFT City, which in turn could lead to increased investment and economic activity in the region, and enhance the attractiveness of GIFT City as a financial hub.