IFSCA proposes direct listing at Gift City without a public offer

Criteria include eligibility thresholds, disclosure requirements, price discovery mechanisms

The International Financial Services Centres Authority (IFSCA) has proposed allowing companies to directly list their equity shares on stock exchanges in GIFT City without making a public offer.

 

However, this would be subject to eligibility thresholds, disclosure requirements, and price discovery mechanisms, according to a consultation paper.

 

Under the draft framework, issuers that are not listed in India or overseas can list directly if they meet at least one of the three financial criteria. They must have minimum operating revenue of $20 million, pre-tax profit of $1 million, or a post-listing market capitalisation (mcap) of $50 million.

 

Globally, direct listings without a public offer are already permitted on major exchanges such as the NYSE and Nasdaq in the US, the London Stock Exchange, and the Tokyo Stock Exchange. Each of these have defined thresholds around profitability, revenue, mcap, and shareholder base.

 

 

“Companies which have successfully scaled and expanded with the capital provided by their founders and/or institutional investors, may not require additional fundraising in the foreseeable future. However, such companies may still seek to list their securities without undertaking a public offer to enhance their visibility, build investor confidence, improve corporate governance standards, and provide an avenue for price discovery and liquidity for existing shareholders,” notes the consultation paper.

 

The consultation paper cites examples of firms like Spotify, Slack Technologies, Palantir Technologies, Coinbase Global, and Roblox Corporation which have listed through direct listing without public offer in foreign jurisdictions.

 

At present, specialised staffing and technology solutions provider Tryfacta Inc is in the initial public offering (IPO) process for listing at GIFT City, for raising nearly $100-150 million.

 

The IPO comprises both fresh issuance and offer for sale (OFS). Earlier this year, edtech firm XED withdrew its $12 million IPO due to several challenges.

 

The regulator noted that in the absence of book-building process and underwriting arrangement, determining listing price without public offer may have certain challenges.

 

For fair and transparent price discovery, it has proposed that the reference or base price may be determined on the basis of a valuation report by an independent and registered valuer.

 

“A special pre-open price discovery session, akin to call auction mechanism, may be conducted on the first day of listing to determine the equilibrium market price based on buy and sell order for efficient price discovery,” the proposal notes.

 

The fresh proposal also permits firms with superior voting rights (SR shares) to list without an IPO. The rider is that such shares must be approved by shareholders and be held for at least three months prior to filing.

 

IFSCA has outlined a streamlined approval process, requiring companies to seek in-principle clearance from a recognised stock exchange within 15 days.

 

The issuer must then file an information document, vetted by a registered investment banker, containing material disclosures to enable informed investor decisions.

 

The document will include details such as risk factors, capital structure, financial statements, litigation, related-party transactions, and management information.

 

To ensure adequate float, Indian-incorporated issuers must comply with domestic minimum public shareholding norms.

 

Foreign issuers may also be specified to maintain at least 10 per cent public shareholding post-listing.

 

The proposed norms are aimed at enhancing the attractiveness of GIFT City as a global capital-raising hub. 

Action plan

• Eligibility tied to revenue, profit, or post-listing market capitalisation thresholds
• Firms need to have minimum operating revenue of $20 mn, pre-tax profit of $1 mn, or a post-listing market capitalisation of $50 mn
• Several global exchanges already allow direct listings under defined financial criteria
• Firms including Spotify, Slack and Palantir, had listed on overseas exchanges this way
• Framework targets companies not seeking fresh capital but market visibility
• Independent valuation and pre-open session suggested for price discovery