The government has allowed Indian companies to list directly on IFSC. Impact on Investors
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The new rules will allow public companies to list on the IFSC stock exchange, opening up the possibility of attracting funds from qualified foreign investors. However, this opportunity is limited to public companies and private companies are still excluded from direct listings. Eligible investors, excluding Indian residents, are granted permission to purchase stocks listed on international exchanges, bringing a new dimension to cross-border investing, while the government emphasizes regulatory approval for eligible investors from countries that share borders with India. I did. The notice also outlines specific pricing formulas for both listed and unlisted companies to ensure transparency and fairness in the listing process.
Potential Benefits and Concerns
The move is expected to bring several benefits to both investors and businesses. IFSC’s capital raising is expected to streamline compliance-related aspects and reduce the burden associated with various laws and regulations. The International Financial Services Center Authority will act as a centralized body to facilitate a more efficient and cost-effective listing process.
The success of this plan requires clarification of specific issues. There are resident holding restrictions on IFSC access, and the move is expected to shift potential investments from the domestic tariff area to the GIFT IFSC area to enjoy various tax benefits, including capital gains exemption on transfer of listed shares. Additionally, this move challenges the existing tax treatment imbalance between Indian individual investors and foreign investors using the offshore portfolio investment route and increases compliance risks for the ultimate beneficial owner.
Additionally, expanding the direct listing framework beyond GIFT IFSC to other global exchanges will broaden its scope and depth, making it a more comprehensive platform for international investments.
the way forward
The Securities and Exchange Board of India is expected to issue operating guidelines for listed companies in India, but clarity on ultimate beneficial ownership still remains an area of focus. This important step aims to integrate Indian capital markets with global markets, attracting foreign investors and instilling global best practices, advanced technologies and access to international markets.
The Indian government’s determination to create a favorable environment for foreign investment is further emphasized through this notification, positioning IFSC as a promising hub for global investment and acting as a catalyst for promoting IFSC.
As the regulatory environment evolves, India is inching closer to its goal of becoming a preferred destination for both domestic and foreign investors.
(The author, Manoj Purohit, is Partner and Leader, Financial Services, Tax and Regulatory Services at BDO India. Views are his own.)
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