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11 days ago
GIFT City nears framework for direct share listings without IPO
Summary
MUMBAI: Some 18 months after regulators permitted direct listings at GIFT IFSC exchanges, a detailed operational framework that allows companies to list shares without raising capital through an initial public offering (IPO) is expected to be released soon, according to three people familiar with the matter.
The framework is intended for companies that do not require additional funding but want to provide liquidity and access to global investors, one of the people said. This person and the other two requested anonymity.
The move comes as GIFT City’s exchanges, the NSE International Exchange and India International Exchange, prepare to host their first IPO by XED, which provides education programs to top executives. The company plans to raise $12 million through a dollar-based offering in GIFT City this month.
While the offering will test the IPO route at the offshore financial centre, the forthcoming framework is aimed at companies that want to list directly on the exchanges.
If implemented, the proposal would allow Indian and global companies, whether already listed elsewhere or privately held, to list their shares on GIFT City exchanges without raising fresh capital. That, in turn, could broaden the pool of companies at the offshore financial centre tapping into global investor appetite.
Emails sent to IFSCA remained unanswered.
“For many companies, especially those eyeing global investors but not yet ready for a full IPO, this may emerge as a compelling middle path,” said Ketaki Mehta, Partner - GIFT City, Cyril Amarchand Mangaldas.
To be sure, the International Financial Services Centres Authority (IFSCA), the regulator for GIFT IFSC, already allows companies to list on IFSC exchanges without making a public offer under Regulation 40 of the International Financial Services Centres Authority (Listing) Regulations, 2024 dated 20 August 2024.
However, detailed operational rules and guidance on how the framework will work in practice are still awaited from the regulator.
IFSCA’s move could also help align GIFT IFSC with other global markets where direct listings are permitted.
For instance, Spotify Technologies listed its shares on the New York Stock Exchange (NYSE) in 2018 without raising money through an IPO. The company chose the route because it was already cash-flow positive and did not need to raise capital. Coinbase and Palantir also skipped the traditional IPO process and opted for direct listings.
Better liquidity, global exposure and cost-effectiveness are among the main reasons companies may consider direct listings, experts said.
The framework provides access to a diversified international investor base, capital-raising flexibility, and global visibility, said Roopal Bajaj, Partner, Singhania & Co.
An exchange official said that when companies list on GIFT City exchanges, it improves their visibility as brokers increase research coverage once the stock starts trading.
A direct listing is often well suited for established companies that are not seeking additional capital but prefer a more cost-effective route to the public markets, said Natasha Treasurywala, Partner at Desai & Diwanji.
Lower transaction costs compared with the traditional IPO route, due to the absence of underwriting expenses and extensive roadshows, make direct listings attractive, said Bajaj of Singhania & Co.
Additionally, direct listings generally do not impose the same lock-in restrictions that apply in an IPO, allowing existing shareholders to achieve immediate liquidity, she added.
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The framework is intended for companies that do not require additional funding but want to provide liquidity and access to global investors, one of the people said. This person and the other two requested anonymity.
The move comes as GIFT City’s exchanges, the NSE International Exchange and India International Exchange, prepare to host their first IPO by XED, which provides education programs to top executives. The company plans to raise $12 million through a dollar-based offering in GIFT City this month.
While the offering will test the IPO route at the offshore financial centre, the forthcoming framework is aimed at companies that want to list directly on the exchanges.
If implemented, the proposal would allow Indian and global companies, whether already listed elsewhere or privately held, to list their shares on GIFT City exchanges without raising fresh capital. That, in turn, could broaden the pool of companies at the offshore financial centre tapping into global investor appetite.
Emails sent to IFSCA remained unanswered.
“For many companies, especially those eyeing global investors but not yet ready for a full IPO, this may emerge as a compelling middle path,” said Ketaki Mehta, Partner - GIFT City, Cyril Amarchand Mangaldas.
To be sure, the International Financial Services Centres Authority (IFSCA), the regulator for GIFT IFSC, already allows companies to list on IFSC exchanges without making a public offer under Regulation 40 of the International Financial Services Centres Authority (Listing) Regulations, 2024 dated 20 August 2024.
However, detailed operational rules and guidance on how the framework will work in practice are still awaited from the regulator.
IFSCA’s move could also help align GIFT IFSC with other global markets where direct listings are permitted.
For instance, Spotify Technologies listed its shares on the New York Stock Exchange (NYSE) in 2018 without raising money through an IPO. The company chose the route because it was already cash-flow positive and did not need to raise capital. Coinbase and Palantir also skipped the traditional IPO process and opted for direct listings.
Better liquidity, global exposure and cost-effectiveness are among the main reasons companies may consider direct listings, experts said.
The framework provides access to a diversified international investor base, capital-raising flexibility, and global visibility, said Roopal Bajaj, Partner, Singhania & Co.
An exchange official said that when companies list on GIFT City exchanges, it improves their visibility as brokers increase research coverage once the stock starts trading.
A direct listing is often well suited for established companies that are not seeking additional capital but prefer a more cost-effective route to the public markets, said Natasha Treasurywala, Partner at Desai & Diwanji.
Lower transaction costs compared with the traditional IPO route, due to the absence of underwriting expenses and extensive roadshows, make direct listings attractive, said Bajaj of Singhania & Co.
Additionally, direct listings generally do not impose the same lock-in restrictions that apply in an IPO, allowing existing shareholders to achieve immediate liquidity, she added.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Download the Mint app and read premium stories
AI Description
The article discusses the development of a framework for direct share listings at GIFT City exchanges, allowing companies to list shares without an IPO. This aims to provide liquidity and global investor access without raising new capital.