GIFTing Growth To Startups: Govt Notifies Direct Listings in GIFT Exchanges

Very soon, Indian startups and companies in the sunrise and technology sectors will be able to access global capital beyond domestic exchanges.

In a significant move aimed at bolstering the global presence of Indian companies, the government has officially notified the Direct Listing Scheme for shares of Indian companies at GIFT City's exchanges. The notification, released by the finance ministry on January 24, paves the way for eligible exchanges - India International Exchange and NSE International Exchange, to facilitate direct listings.

SEBI is in the process of issuing the operational guidelines for listed public Indian companies.

Boosting Global Capital Access for Indian Startups

The Direct Listing Scheme will offer a unique avenue for public Indian companies, particularly start-ups and those in the sunrise and technology sectors, to access global capital beyond the confines of domestic exchanges. This initiative is anticipated to enhance the valuation of Indian companies, aligning them with global standards of scale and performance.

Finance Minister Nirmala Sitharaman, during the Vibrant Gujarat Global Summit on January 11, was optimistic about the systematic progression of the direct listing process at GIFT IFSC.

She highlighted the potential for Indian companies to effortlessly tap into global funds, further reinforcing the country's position in the international market.

“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.

Potential Benefits for Participating Companies

The scheme help the startups and other companies in unlocking growth opportunities and expanding the investor base for Indian companies. With the flexibility to access both domestic and international markets, companies can raise capital in Indian Rupees domestically and in foreign currency from global investors at GIFT IFSC. This flexibility is particularly advantageous for companies with global ambitions seeking opportunities to expand their presence in international markets.

How Will The Indian Capital Market For Startups Change?

The Ministry of Finance today said in a statement, “This policy initiative, to enable listing of Indian companies in GIFT-IFSC, will reshape the Indian capital market landscape and offers Indian companies, especially startups and companies in the sunrise and technology sectors, an alternative avenue to access global capital beyond the domestic exchanges. 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 public  Indian companies will have the flexibility to access both markets i.e. domestic market for raising capital in INR and the international market at IFSC for raising capital in foreign currency from the global investors. This initiative will particularly benefit Indian companies going global and having ambitions to look at opportunities for expanding their presence in other markets. It is also expected to provide a boost to the capital market ecosystem at GIFT IFSC by provision of new investment opportunities for investors, diversification of financial products and by enhancing liquidity,” added the release.

What Are The Incentives for Foreign Investors?

Foreign investors stand to benefit significantly from the Direct Listing Scheme. The transactions on the stock exchanges in GIFT IFSC are conducted in foreign currency, mitigating currency risk for investors. The extended trading hours and tax incentives provided under the Income Tax Act, 1961, make GIFT IFSC an attractive destination for global investors. Notably, capital gains arising from the transfer of equity shares of Indian companies in GIFT IFSC are exempt from tax.

Regulatory Framework and Policy Initiatives

The Department of Economic Affairs, Ministry of Finance, has amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, and introduced the 'Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme.' Simultaneously, the Ministry of Corporate Affairs has issued the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024, providing a comprehensive regulatory framework for public Indian companies to list their shares on international exchanges.

The policy initiative, announced by Union Minister for Finance and Corporate Affairs Nirmala Sitharaman in July 2023, marks a significant transformation in the Indian capital market landscape. This move is expected to attract new investment opportunities, diversify financial products, and enhance liquidity in the capital market ecosystem at GIFT IFSC.

GIFT-IFSC: Connecting India with Global Opportunities

GIFT-IFSC, India's first international financial services center, plays a pivotal role in connecting the Indian economy with global financial systems. Regulated by the International Financial Services Centres Authority (IFSCA), GIFT-IFSC aims to 'onshore the offshore,' bringing back financial services and transactions that currently occur outside India. The establishment of GIFT-IFSC reflects a commitment to providing a world-class regulatory and business environment, accelerating global sustainable capital flows, and fostering seamless global capital movement into India.

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