GIFT dual-listing plan gathers pace; Sebi, IFSCA talk with stakeholders

Regulators are examining listing, public float, taxation, currency and surveillance rules for Indian companies seeking to raise funds from global investors at GIFT City

Plans to allow listed Indian companies to raise capital from global investors through dual listing at GIFT City are gathering pace, with the Securities and Exchange Board of India (Sebi) and International Financial Services Centres Authority (IFSCA) holding multiple meetings last month to work out the contours of the framework. 

The discussions, which began more than two years ago, are now focusing on key modalities of the proposed framework, including potential changes to Sebi regulations governing listing, insider trading, buybacks and takeovers, sources said. 

The committee discussing the measures includes members of both the regulators and market infrastructure institutions (MIIs). 

According to sources, companies may be allowed to raise capital from non-residents and other global investors in dollar denominations. Domestic investors, however, may not be allowed to trade in these securities listed on international exchanges at the Gujarat International Finance Tec-City, or GIFT City. 

“Sebi has raised several issues — from price variations to the minimum public float. There are various other genuine concerns that need to be addressed before allowing dual listings,” said a source aware of the developments. 

The authorities are also looking at how the capital raised will be monitored, with custodians at GIFT City likely to play a key role. Other areas under consideration include minimum public float, currency fluctuations, depth of investor participation and tax implications. 

“Indian listed companies are required to maintain at least 25 per cent minimum public shareholding under the domestic framework. IFSC separately prescribes its own minimum public offer requirements,” said Rajul Bohra, Partner, JSA Advocates & Solicitors. However, shares held by investors on the IFSC platform may not count toward the domestic public shareholding threshold because the existing definition was drafted with domestic depository receipts in mind, not direct equity listings on IFSC exchanges, she added. 

Besides, the free float of a dual-listed company could end up getting fragmented across two independently measured pools.

 

The discussions follow the direct listing framework announced in 2023 and implemented in 2024. An expert committee had also submitted its report on the implementation of the framework nearly two years ago. 

Legal experts added that Sebi’s regulations may take primacy as the companies are already listed on domestic exchanges. It will require robust data sharing between both the regulators along with strong surveillance to cover trading activity on both the platforms. 

“The key challenges that need to be addressed include alignment of the depositories to facilitate their smooth functioning and establishing a mechanism for seamless transfer of securities between the depositories while maintaining accurate records of beneficial ownership, price arbitrage, robust norms for simultaneous offers in both jurisdictions with common offer documents, coordination between Sebi and IFSCA,” said Apurva Kanvinde, Partner, Juris Corp. 

While consultants highlight that tax-related matters fall outside Sebi’s purview, these will need to be clarified by the government at the GIFT-IFSC.

 

“The foreign-currency nature of the IFSC market also raises FEMA, taxation and accounting considerations. The framework should provide clarity on the treatment of proceeds from the IFSC issuance, repatriation, foreign exchange conversion, capital gains, withholding taxes and reporting requirements,” said Shivank Arora, Associate Partner at Alpha Partners.

 

Last month, the IFSCA proposed allowing companies to list their equity shares directly on the stock exchanges in GIFT City without any public offer.

 

Under the draft framework, issuers not listed in India or abroad can list directly if they meet at least one of three financial criteria: Minimum operating revenue of $20 million, pre-tax profit of $1 million, or a post-listing market capitalisation of $50 million.

 

“A phased rollout, starting with large-cap firms, could help regulators fine-tune tax treatment and cross-border settlement processes. Addressing these operational nuances early will ensure long-term investor confidence,” said Amit Tungare, Managing Partner at Asahi Legal.

 

Incidentally, the first initial public offering (IPO) at GIFT City, that of XED Executive Development, launched in March was withdrawn due to low subscriptions arising from concerns such as KYC (know your customer) norms.

 

Sources said the factors that led to the low subscription have now been resolved, with certain players based in GIFT-IFSC now allowed to underwrite the issues.

 

Currently, US-based Tryfacta Inc is awaiting approval from the IFSCA for its IPO, estimated at $100-150 million.

 

Rules taking shape

On the table: Sebi and IFSCA are working on listing, takeover and insider-trading norms

Dollar fundraising: Companies may raise capital from global investors in dollars; domestic investors may be excluded

Minimum public float hurdle: IFSC-held shares may not count towards Sebi’s 25% requirement

Cross-market oversight: Depositories, ownership records and surveillance must work across both markets

Direct listing criteria: Unlisted issuers need $20m revenue, $1m pre-tax profit or $50m post-listing market cap