Firms can now list directly on IFSC exchanges to access global capital

Indian companies will soon have the opportunity to access foreign capital within India through registrations with exchanges at the International Financial Services Centre (IFSC) in the Gujarat International Financial Tech City (GIFT).

Finance Minister Nirmala Sitharaman announced the government’s decision to facilitate direct listings of both listed and unlisted companies on the IFSC exchanges, marking a significant step to boost India’s financial capabilities.

A new financial hub is poised to rival established centers like Mumbai and even global financial powerhouses like Singapore and Dubai.

In the latest development, India has granted permission for its listed and unlisted companies to be listed on exchanges registered in the International Financial Services Centre (IFSC). This decision is expected to provide companies with easier and more cost-effective access to foreign capital.

Furthermore, the SGX Nifty, which was previously traded on the Singapore Exchange’s platform, has been transferred to the National Stock Exchange’s International Exchange in GIFT City.

GIFT City, a tax-neutral financial center based in Gujarat, aims to rival financial hubs like Singapore and provides attractive tax incentives and a more streamlined regulatory environment for businesses. The IFSC currently accommodates two stock exchanges: a commodity bourse and a bullion exchange.

India’s Capital Market Initiatives & Future of Securities Market Code

The current regulatory framework in the country prohibits the direct listing of equity shares of Indian-incorporated corporations on international stock markets. As of now, the only avenues for Indian corporations to access global equity capital markets are through the American Depository Receipts (ADR) and Global Depository Receipts (GDR) regimes. Although the government announced plans in 2020 to permit primary listings on foreign exchanges, the initiative was put on hold following opposition from nationalist groups affiliated with the ruling party.

Sitharaman highlighted the government’s recent initiatives, emphasizing the significant move of consolidating the laws governing the securities market in the country into a single Securities Market Code.

“The objective is to consolidate the SCRA (Securities Contracts (Regulations) Act) of 1956, the SEBI Act of 1992, and the Depositories Act of 1996 into one comprehensive Act with updated and rationalized provisions,” she explained. This consolidation is crucial as it ensures the Code is future-ready, taking into account long-term developments and promoting ease of doing business.

The finance minister further elaborated that the Securities Market Code is designed to cater to the developmental and regulatory needs of the country’s rapidly growing capital market. With a focus on fostering growth and facilitating a conducive environment, this Code is expected to play a pivotal role in shaping the future of India’s capital market.

The latest development will open up new avenues for India’s capital markets, offering companies the potential to access similar benefits of foreign capital through the IFSC route. The government projects that the move is expected to give a significant boost to India’s financial landscape.