IFSCA proposes direct listing framework in GIFT City, offering firms an IPO-free route to public markets

Companies looking to go public without raising fresh capital could soon have a formal route to list in GIFT City, with the International Financial Services Centres Authority (IFSCA) proposing a regulatory framework for the direct listing of equity shares and convertible securities without an initial public offering (IPO).

In a consultation paper released on July 13, the regulator proposed detailed eligibility norms, disclosure requirements and pricing mechanisms for companies seeking to list on recognised stock exchanges in the International Financial Services Centre (IFSC) without undertaking a public offer. The regulator said the proposed framework will facilitate liquidity and exit opportunities for founders, early-stage investors, private equity and venture capital funds, as well as employee stock option (ESOP) holders, while allowing companies to avoid shareholder dilution and the underwriting and issuance costs associated with a traditional IPO.

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According to IFSCA, the route is intended for companies that have already scaled their businesses with capital from founders or institutional investors and do not require fresh fundraising but still want the benefits of being publicly listed. These include greater visibility, improved corporate governance, enhanced investor confidence, price discovery and liquidity for existing shareholders. “Companies which have successfully scaled and expanded with the capital provided by their founders and/or institutional investors may not require additional fund raising in the foreseeable future,” stated the consultation paper. Such companies may still seek listing “to enhance their visibility, build investor confidence, improve corporate governance standards, and provide an avenue for price discovery and liquidity for existing shareholders.”

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The proposal comes as IFSCA looks to broaden the avenues for equity listings in GIFT City after the jurisdiction’s first IPO attempt failed to take off. Earlier this year, XED Executive Development withdrew what was slated to be GIFT City’s maiden IPO, citing muted investor participation and operational challenges, including KYC-related issues. Since then, the offshore financial centre has continued to attract listing interest through other routes.

In June, US-based workforce solutions provider Tryfacta filed draft papers for a dollar-denominated IPO on NSE International Exchange (NSE IX) and India INX, which, if completed, would become the first equity listing in India by a US-headquartered company. Earlier, in February, businessline also reported that Cyprus-listed Ellinas Finance would become the first company to undertake a cross-border equity listing between India and Cyprus on NSE IX, underscoring GIFT City’s growing ambition to position itself as an international capital-raising and listing hub.

Under the new IFSCA proposal, companies would be eligible for direct listing if they have operating revenue of at least $20 million in the latest financial year (or on average over the previous three years), pre-tax profit of at least $1 million, or a post-listing market capitalisation of at least $50 million. The market capitalisation threshold is double the $25 million requirement prescribed for companies undertaking a public offer in the IFSC.

IFSCA said the higher threshold is intended to address concerns around liquidity and price discovery. “Listings without a public offer may present additional challenges in achieving adequate liquidity and price discovery due to the absence of fresh issuance and broad-based distribution,” the paper noted.

Unlike a conventional IPO, issuers will not publish an offer document but will instead file an information document through an IFSCA-registered investment banker, who will be required to undertake due diligence and certify that the disclosures are true and adequat...