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25th January 2024 (7 Topics)

Indian Firms Allowed Direct Listing on GIFT-IFSC International Markets

Context

The Indian government's recent decision to permit direct listing of securities by public Indian companies on the international exchanges of GIFT International Financial Services Centre (GIFT-IFSC) marks a significant stride in enhancing access to global capital.

Expectations: Foster economic growth, foreign investment, and broaden investor opportunities.

Background

  • To facilitate direct listings on GIFT-IFSC's international exchanges, the Department of Economic Affairs and the Ministry of Corporate Affairs have introduced amendments to regulatory frameworks.
  • The revised Foreign Exchange Management Rules and the newly notified Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules lay the foundation for public Indian companies to issue and list shares on approved international exchanges.

Framework and Regulatory Oversight:

  • The permitted international stock exchanges at GIFT-IFSC include India International Exchange and NSE International Exchange.
  • Both operate under the regulatory supervision of the International Financial Services Centres Authority (IFSCA).
  • GIFT-IFSC, as India's premier international financial services centre, aims to facilitate global connectivity for the Indian economy, fostering the seamless flow of global capital into the country.

Potential Impact on Indian Capital Market:

  • This policy initiative is poised to reshape the Indian capital market landscape, offering a viable alternative for Indian companies, especially start-ups and those in sunrise and technology sectors, to access global capital.
  • The Finance Ministry anticipates that this move will align Indian companies' valuations with global standards, enhance foreign investment inflows, unlock growth opportunities, and diversify the investor base.

Flexibility for Public Indian Companies:

  • Under this initiative, public Indian companies gain the flexibility to raise capital in both domestic and international markets.
  • They can leverage domestic exchanges to raise capital in rupees and the IFSC international market to raise capital in foreign currency from global investors.

Strategic Benefits and Outlook:

  • The government envisions that this initiative will particularly benefit Indian companies with global ambitions, fostering expansion into other markets.
  • Additionally, it is expected to boost the capital market ecosystem at GIFT-IFSC by introducing new investment opportunities, diversifying financial products, and enhancing liquidity.
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