Domestic mutual funds hold the match to GIFT IFSC's listing fire

Mkt players aim to stoke flames of direct listing in financial hub

To promote direct listing in Gujarat International Finance Tec-City (GIFT City), several market participants have recommended to the International Financial Services Centres Authority (IFSCA) and the government that domestic mutual funds (MFs) be allowed to invest in companies pursuing this route, sources said.

 

According to people familiar with the developments, the Association of Mutual Funds in India (Amfi) and the Indian Venture and Alternate Capital Association (IVCA), an industry body representing alternative investment funds, have put forward these suggestions.

 

On August 30, the IFSCA issued final regulations detailing the eligibility conditions and norms for direct listing on the exchanges in GIFT City.

 

With the notification in place, the IFSCA has opened the door for foreign companies and domestic unlisted firms to raise capital through this emerging financial hub. This route is intended to assist startups seeking global capital from offshore investors.

 

However, to date, no company has filed its draft offer documents or reached the final stage of application filing due to concerns about low participation in the initial phases, said a source familiar with the developments.

 

Sources added that around four to five companies have shown interest and are exploring this route, but their plans have not yet materialised.

 

Currently, Indian resident investors are not permitted to invest or trade in the securities of companies listed on the two active exchanges in the GIFT International Financial Services Centre (GIFT IFSC).

 

“Over the past three months of consultation, industry associations and other stakeholders have proposed several ways to stimulate growth in this segment. Allowing domestic MFs to invest would help build the ecosystem and bring liquidity, as many Indian startups would gain greater recognition here, and funds would be more familiar with the structures,” said a regulatory source.

 

If allowed, Indian residents would gain exposure through MFs.

 

As the securities would be dollar-denominated, the recommendation is to increase the overseas exposure limit for MFs by an additional $1 billion to $2 billion, sources said.

 

Emailed queries sent to IFSCA, Amfi, and IVCA went unanswered until the time of going to press.

 

To be eligible for listing in GIFT IFSC, a company must meet certain criteria: a minimum operating revenue of $20 million in the previous financial year, a pre-tax profit of at least $1 million, and a post-issue market capitalisation of at least $25 million.

 

As of September, 82 broker-dealers, four investment bankers, five custodians, and 22 clearing members are registered in GIFT IFSC — key entities for developing vibrant markets and ensuring high volumes on the exchanges.

 

The Centre first notified regulations in January this year to facilitate the listing of public Indian companies in GIFT City. Following this, the IFSCA sought comments through a consultation paper on additional regulatory requirements before issuing the final norms in August.

 

The GIFT City regulator has been conducting several seminars and sessions across India to promote the direct listing route.

   

 

Kindling the path to GIFT IFSC listing

 

·        THE FIRST SPARK

January: Centre notifies regulations enabling public Indian companies to list in GIFT IFSC

 

·        IGNITING DISCUSSION

May: IFSCA issues consultation paper on additional regulatory requirements

 

·        LIGHTING THE WAY

August: GIFT City regulator finalises eligibility criteria and norms for direct listing

 

·        FUELLING INTEREST

Ongoing discussions with stakeholders to generate interest in direct listing

 

·        UNLIT PROSPECTS

No draft filings yet; 4-5 firms exploring the direct listing route

 

·        GLOBAL ACCESS

Direct listing set to unlock capital from international investors