GIFT City listings: The government on Wednesday, January 24, 2023, said that local companies with shareholders from neighbouring nations, including China, require approval for listings on the Gujarat International Financial Tech City (GIFT City). The guidelines outline the process for companies seeking to list on the International Financial Services Centre (IFSC) housed in GIFT, a flagship project of Prime Minister Narendra Modi.

GIFT-IFSC, established as a tax-neutral financial center, aims to compete globally by providing fiscal incentives and a streamlined regulatory environment. The newly introduced rules specify that government approval is necessary for listings if the beneficial owner is a citizen of a country sharing a land border with India or an entity incorporated in such a country.

While the guidelines did not explicitly name any countries, a similar set of rules was issued in 2020, tightening scrutiny on investments from countries sharing a land border with India. This previous move had resulted in delays in billions of dollars of incoming investments from Chinese companies.

Despite recent statements suggesting a potential easing of scrutiny on Chinese investments, the new rules underscore the government's commitment to regulating listings and ensuring national interests are safeguarded. The regulations apply to listings on the India International Exchange and the NSE International Exchange at IFSC.

Direct listings allowed

In a related development, the government has allowed direct listing of securities by public Indian companies on international exchanges at GIFT-IFSC. The initiative, announced in July 2023 by the Union Minister for Finance and Corporate Affairs Nirmala Sitharaman, aims to boost foreign investment flows, unlock growth opportunities, and broaden the investor base for Indian companies.

The Department of Economic Affairs (DEA) 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 (MCA) has issued the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024.

This regulatory framework enables public Indian companies to issue and list their shares on permitted international exchanges. The framework currently allows unlisted public Indian companies to list their shares on international exchanges, with SEBI expected to provide operational guidelines for listed public Indian companies.

The initiative is anticipated to reshape the Indian capital market landscape, offering companies an alternative avenue to access global capital. This move is expected to lead to better valuation of Indian companies, boost foreign investment flows, unlock growth opportunities, and broaden the investor base. Indian companies will now have the flexibility to access both domestic and international markets, providing a significant boost to the capital market ecosystem at GIFT-IFSC.