With the government clearing the decks for direct listing at the Gujarat International Finance Tec-City (GIFT City) International Financial Services Centre (IFSC), issuers will wait for the ecosystem to develop further before firming up their listing plans.


Photograph: Amit Dave/Reuters

In the meantime, most companies may continue to prefer listing in the ons­hore market, even as the new avenue provides key benefits such as tax wai­vers and reduced foreign exchange risk.

Sources said that a few key things need to be ironed out further.


This includes clarity from the Reserve Bank of India (RBI) on how the money raised by domestic companies at the IFSC will be routed back to India.

Industry players said enabling listings at GIFT City will potentially help domestic startups fetch better valuations.

However, a low investor base could act as an initial hiccup and dissuade early adopters.

“The absence of underwriters and institutional investors in direct listings can lead to increased volatility and uncertainty during the initial trading period on GIFT.

“Without the stabilising influence of underwriters, stock prices may experience more unpredictable movements, making it challenging to establish a stable market,” said Prateek Goyall, partner, MV Kini.

Many are advocating for allowing domestic institutions like mutual funds (MFs) to participate at the IFSC to boost liquidity.

“Fostering a resilient investor base would be a boon, and therefore, if large sophisticated Indian investors or at least MFs are allowed to invest in these foreign-denominated securities, it will entirely open up a novel category of investors,” said Pranay Bhatia, partner, tax and regulatory services, BDO India.

According to the International Financial Services Centres Authority (IFSCA) website, there are only a total of three investment bankers and merchant bankers at the IFSCA at the moment, including ICICI Bank, HSBC, and Pantomath Global.

Some believe the latest development around direct listing will help more banks register.

“With currently only a limited number of entities registered as investment bankers in the IFSC, this change is poised to encourage many more to register, anticipating the surge in companies looking to list there.

“This is set to significantly boost merchant banking activities within IFSC, further establishing India as a dynamic hub for global finance,” said Suresh Swamy, partner, Price Waterhouse & Co.

Meanwhile, key stakeholders in the ecosystem have already begun efforts to make direct listings at GIFT City.

The IFSCA, a regulatory body, plans to engage with investment bankers and issuers to encourage them to consider listing.

Meanwhile, the Securities and Exchange Board of India (Sebi) is in the process of issuing the operational guidelines to enable domestically listed companies to also list at the IFSC.

Exchanges also plan to make a case for listing there.

“The NSE International Exchange (NSE IX) will offer listings at a competitive rate, almost similar to the domestic exchange.

“It will be much more cost-efficient in comparison to the other international exchanges.

“We believe this will give a cost advantage to the issuers here in IFSC,” said V Balasubramaniam, managing director and chief executive officer, NSE IX — one of the two permitted exchanges at GIFT City.

Experts said the IFSC route will reduce currency risk and also help save on various capital market taxes — such as securities transaction tax and stamp duty — levied on onshore trades.

This will encourage overseas investors and non-resident Indians (NRIs) to look at GIFT City more favourably.

“It has been recommended that NRIs who have already gone through the know-your-customer process with stockbrokers, who have set up units in GIFT City, not do it again and be allowed to trade on the IFSC exchanges.

“This would be similar to the provision made for foreign portfolio investors who were already registered with Sebi and were made eligible to participate in IFSC,” added Balasubramaniam.

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