𝗜𝗙𝗦𝗖𝗔 𝐩𝐫𝗼𝗽𝗼𝘀𝗲𝘀 𝗮 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸 𝗳𝗼𝗿 𝗗𝗶𝗿𝗲𝗰𝘁 𝗟𝗶𝘀𝘁𝗶𝗻𝗴 𝗼𝗳 𝗦𝗽𝗲𝗰𝗶𝗳𝗶𝗲𝗱 𝗦𝗲𝗰𝘂𝗿𝗶𝘁𝗶𝗲𝘀 𝘄𝗶𝘁𝗵𝗼𝘂𝘁 𝗮 𝗣𝘂𝗯𝗹𝗶𝗰 𝗢𝗳𝗳𝗲𝗿
The International Financial Services Centres Authority (IFSCA) has released a consultation paper proposing a regulatory framework for the direct listing of equity shares and convertible securities on the recognised stock exchanges in the GIFT IFSC without undertaking a public offer, operationalising 𝘙𝘦𝘨𝘶𝘭𝘢𝘵𝘪𝘰𝘯 40 𝘰𝘧 𝘵𝘩𝘦 𝘐𝘍𝘚𝘊𝘈 (𝘓𝘪𝘴𝘵𝘪𝘯𝘨) 𝘙𝘦𝘨𝘶𝘭𝘢𝘵𝘪𝘰𝘯𝘴, 2024.
The proposal is noteworthy as it introduces an alternative listing route for companies that do not require fresh capital, but seek enhanced visibility, better corporate governance and liquidity for existing shareholders.
Importantly, the framework has been developed after recommendations of the 𝘚𝘵𝘢𝘯𝘥𝘪𝘯𝘨 𝘊𝘰𝘮𝘮𝘪𝘵𝘵𝘦𝘦 𝘰𝘯 𝘗𝘳𝘪𝘮𝘢𝘳𝘺 𝘔𝘢𝘳𝘬𝘦𝘵𝘴 (𝘚𝘊𝘖𝘗) and draws upon international practices adopted by the New York stock exchange investment Company (NYSE), Nasdaq, London Stock Exchange (LSE) and Tokyo Stock Exchange Japan, where direct listings have long been permitted. Global companies such as Spotify Technology, Coinbase Global and Palantir Technologies have successfully pursued this listing route.
Key proposals include:
1. 𝐄𝐥𝐢𝐠𝐢𝐛𝐢𝐥𝐢𝐭𝐲 𝐜𝐫𝐢𝐭𝐞𝐫𝐢𝐚: An issuer may qualify by satisfying any one of the following: (i) operating revenue threshold (same as the existing public offer framework), (ii) pre-tax profit threshold (also aligned with the existing framework), or (iii) a proposed minimum post-listing market capitalisation of USD 50 million, reflecting the unique characteristics of direct listings.
2. 𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐃𝐨𝐜𝐮𝐦𝐞𝐧𝐭: Instead of an offer document, issuers must file an Information Document through an investment banker, accompanied by a due diligence certificate and comprehensive disclosures to facilitate informed investment decisions.
3. 𝐌𝐢𝐧𝐢𝐦𝐮𝐦 𝐏𝐮𝐛𝐥𝐢𝐜 𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐢𝐧𝐠 (𝐌𝐏𝐒): The continuous MPS requirements under Rule 19A of the Securities Contracts (Regulation) Rules, 1957 will continue to apply to Indian issuers, while foreign issuers must maintain a minimum public shareholding of 10%.
4. 𝐏𝐫𝐢𝐜𝐢𝐧𝐠 𝐦𝐞𝐜𝐡𝐚𝐧𝐢𝐬𝐦: In the absence of book-building, the framework proposes a valuation-based base price, followed by a special pre-open price discovery session, with the detailed mechanism to be prescribed by the recognised stock exchanges.
With several leading global companies having already demonstrated the viability of direct listings, it will be interesting to see whether the proposed framework positions GIFT IFSC as a competitive international listing destination for companies that seek market access without capital raising.