Big GIFT: Norms unveiled for direct global listing

India Wednesday decided to allow domestic public companies to issue and list their shares directly on a couple of global exchanges housed at the International Financial Services Centre (IFSC) in Gujarat's GIFT City, a deemed foreign jurisdiction.

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

Importantly, Indian residents can't undertake share transactions on the IFSC exchanges, which are meant for only foreign investors and non-resident Indians.


To start with, the framework allows unlisted public companies to list their shares on the stipulated bourses-India International Exchange and NSE International Exchange.

Capital markets regulator Sebi is in the process of floating operational guidelines that would enable listed Indian public companies to list directly on these bourses as well, according to a finance ministry statement.

"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," the ministry said. Prior to this, Indian companies were allowed to access overseas equity markets only through depository receipts, such as the American Depository Receipts and Global Depository Receipts, after they go public in India.

Importantly, capital gains arising out of transfer of equity shares of companies listed on the IFSC exchanges are already exempted from tax.

A public company, listed or unlisted, is essentially the one that has a broader shareholder base and a minimum share capital, and is not incorporated as a private company. As per rules, public companies must have at least seven shareholders and three directors and a minimum authorised share capital of ₹1 lakh.

Conditions apply

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

The company that wants to list and any of its promoters or directors or shareholders must not have been debarred from accessing the capital market by the regulator. Their promoters and directors must not be wilful defaulters or fugitive economic offenders, among others. Companies in the prohibited sectors under the foreign direct investment (FDI) regime are not allowed to list under this framework. The equity shares listed on these international exchanges will be counted towards the foreign holding of the company and subject to the sector-specific FDI limit.

Ankit Singhi, head-corporate affairs & compliance at Corporate Professionals, said given the various tax incentives being offered at GIFT City, foreign investors may find a tax efficient platform for investment. "Importantly, the framework restricts person residents in India from trading shares on the stock exchange in GIFT city," Singhi said.