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Direct Listing on Global Platforms: Recent Regulatory Guidelines Unveiled

By - King Stubb & Kasiva on February 26, 2024


On July 28, 2023, the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman issued a notification to enable Indian companies to directly list on exchanges in the Gift City International Financial Services Centre (GIFT IFSC). This move has led to significant developments, including amendments to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019[1] by the Department of Economic Affairs (DEA), operating under the Ministry of Finance. These amendments have formalized the Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme. Additionally, in response to this shift, the Ministry of Corporate Affairs (MCA) issued the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024 on January 25, 2024.

Recent guidelines:

On January 24, 2024, the Ministry of Finance introduced a significant amendment to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, through the enactment of the Foreign Exchange Management (Nondebt Instruments) Amendment Rules, 2024.[2] This amendment marks a pivotal shift in policy, as it now permits Indian public companies to directly list their securities on international exchanges situated within the Gift City International Financial Services Centre (GIFT IFSC). This regulatory alteration deviates from prior norms that restricted Indian companies from issuing or listing equity shares abroad, signalling a fundamental change in the approach towards international market participation for Indian entities. This regulatory framework not only signifies a progressive step towards global integration but also holds the potential to redefine the landscape for Indian companies aspiring for international exposure through direct listings.

This strategic manoeuvre builds upon earlier legislative revisions brought forth by the Companies (Amendment) Act, 2020, which laid the groundwork for the direct listing of specified classes of securities of Indian public companies on recognized stock exchanges in permissible foreign or other prescribed jurisdictions. Direct listing, as a method, entails companies seeking to raise capital by publicly listing their shares on an exchange market. Unlike traditional initial public offerings (IPOs), direct listing circumvents intermediaries, granting companies the autonomy to sell their shares directly to the public. Unlike IPOs, the direct listing process does not involve the issuance of new shares or the raising of capital from investors. Instead, it provides companies with a direct avenue to enter public markets, streamlining the listing process and potentially reducing associated costs and complexities.

The 'Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme,' commonly referred to as the Direct Listing Scheme, is meticulously outlined in Schedule XI of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. This scheme delineates the procedures governing the issuance and listing of equity shares of public Indian companies on international exchanges. Notably, private companies are excluded from the purview of this scheme due to restrictions articulated in the Companies Act, which prohibit public subscriptions. The scheme exclusively extends its provisions to public Indian companies, irrespective of whether they are listed or unlisted, affording them the opportunity to issue and list their shares on international exchanges.

Presently, the regulatory framework accommodates unlisted public Indian companies, enabling them to list shares on international exchanges. Paragraph 3 of the Direct Listing Scheme offers insights into the eligibility criteria for public Indian companies aspiring to issue equity shares in permissible jurisdictions, outlining the parameters and conditions for participation in this transformative initiative.

About International exchange:

The International Financial Services Centre encompasses two prominent stock exchanges: the India International Exchange and the NSE International Exchange. Both exchanges function as subsidiaries within the GIFT IFSC, with the India International Exchange being associated with the Bombay Stock Exchange (BSE) and the NSE International Exchange aligned with the National Stock Exchange of India (NSE). Currently situated within the GIFT IFSC, both entities fall under the regulatory oversight of the International Financial Services Centres Authority (IFSCA).

Established by the IFSCA Act of 2019, the IFSCA serves as the unified regulatory authority entrusted with the development and supervision of financial services and institutions operating within the GIFT IFSC ecosystem. The overarching goal of the IFSC is to enhance the depth of the Indian financial system and fortify the competitiveness of Indian companies by facilitating the seamless inflow of global capital. To support this objective, the regulatory and business environment at the GIFT IFSC is meticulously crafted to provide certain tax exemptions, thereby fostering an ecosystem where companies based in the GIFT IFSC can effectively compete on the global stage. Through these measures, the IFSC endeavours to position India as a leading destination for international financial services, attracting investment, fostering innovation, and driving economic growth.

Companies Rules, 2024:

Rule 5 of the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024, delineates the eligibility criteria for companies seeking to issue their equity shares for listing in accordance with the specified rules. This regulation sets stringent standards for eligibility, disqualifying companies falling under certain categories such as those registered under Section 8 or declared as Nidhi under Section 406 of the Companies Act, 2013. Additionally, companies limited by guarantee and having share capital, as well as those with outstanding deposits accepted from the public, are excluded from eligibility. Financial health indicators play a crucial role in determining eligibility, with companies exhibiting a negative net worth or defaulting in payment to banks, public financial institutions, debenture holders, or other secured creditors deemed ineligible.

However, exceptions are made for companies rectifying defaults, subject to a two-year period lapse since rectification. Moreover, companies undergoing winding-up proceedings or resolution under the Insolvency and Bankruptcy Code, 2016, are ineligible. The rule underlines the importance of compliance with statutory obligations, disqualifying companies defaulting in filing annual returns or financial statements under Sections 92 and 137 of the Companies Act. This underscores the significance of transparency and adherence to regulatory timelines in the international listing process. Furthermore, both listed and unlisted Indian companies are afforded the opportunity to issue equity shares on international exchanges, provided they adhere to the stipulations of the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024, and comply with regulatory guidelines set by permitted international exchanges within the GIFT IFSC.


In conclusion, the recent Amendment marks a significant policy shift, heralding a new era for public Indian companies to issue and list their shares on permitted international exchanges. This transformative initiative is set to redefine the Indian capital market landscape, offering companies an alternative route to access global capital markets beyond domestic exchanges. The anticipated benefits are substantial, ranging from improved valuation aligned with global standards to heightened foreign investment inflows and the unlocking of new growth opportunities. As Indian companies embrace this opportunity, they stand to enhance their competitiveness on the global stage while contributing to the overall development and dynamism of the Indian economy.



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