India Notifies Rules For Firms To List Directly In GIFT City

(Bloomberg) -- India notified rules to allow its companies to list on international exchanges at a new financial hub in the state of Gujarat, where the nation permits easier foreign transactions.

Publicly-traded companies and private companies can now list their stock on BSE’s India International Exchange and NSE International Exchange located at the Gujarat International Finance Tec-City, according to the notification issued Wednesday. 

The move is aimed at providing access to global capital and improving valuations for Indian companies. Businesses operating in GIFT City, a flagship project of Prime Minister Narendra Modi that aims to rival global financial hubs like Dubai and Singapore, are exempt from rules and taxes that hamper trading in the rest of the country. 

“This initiative will particularly benefit Indian companies going global and having ambitions to look at opportunities for expanding their presence in other markets,” the ministry of finance said in a statement. 

The notification comes days after Finance Minister Nirmala Sitharaman said the government was going through the process of direct listing of stocks in GIFT IFSC in a “very systematic manner.”

Read more: Modi’s GIFT City Gears Up For Direct Listings, Re-Insurance

Foreign investors will now have easy access to Indian securities at lower costs. Dollar-denominated trades will help them save on hedging and currency conversion costs. Further, securities listed on GIFT City bourses are exempt from security transaction tax and goods and services tax. 

Global funds have bought local stocks worth over $20 billion on a net basis last year, according to depository data compiled by Bloomberg.

Until now, Indian companies could access foreign exchanges only through instruments such as American depository receipts for raising funds. However, the past few years have seen dwindling interest in such offerings. Indian companies raised over $24 billion in the last two decades, while there have been no new offerings since 2019, according to Prime Database. 

Meanwhile, Chinese companies have raised more than $100 billion through listing of ADRs — surrogate securities that allow investors to hold overseas shares — after the first wave of such companies started selling shares in 1999.

Sitharaman in 2020 announced plans for direct overseas listing by Indian public companies as a part of reforms to ease doing business in India. 

Direct listing would provide an alternative avenue to startups and tech companies to access global capital while boosting foreign investment flows and enhancing liquidity, the government statement said.

--With assistance from Shruti Srivastava.

(Updates with government statement and details throughout)

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