๐๐๐ฆ๐๐ ๐ฉ๐ซ๐ผ๐ฝ๐ผ๐๐ฒ๐ ๐ฎ ๐๐ฟ๐ฎ๐บ๐ฒ๐๐ผ๐ฟ๐ธ ๐ณ๐ผ๐ฟ ๐๐ถ๐ฟ๐ฒ๐ฐ๐ ๐๐ถ๐๐๐ถ๐ป๐ด ๐ผ๐ณ ๐ฆ๐ฝ๐ฒ๐ฐ๐ถ๐ณ๐ถ๐ฒ๐ฑ ๐ฆ๐ฒ๐ฐ๐๐ฟ๐ถ๐๐ถ๐ฒ๐ ๐๐ถ๐๐ต๐ผ๐๐ ๐ฎ ๐ฃ๐๐ฏ๐น๐ถ๐ฐ ๐ข๐ณ๐ณ๐ฒ๐ฟ
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 ๐๐ฆ๐จ๐ถ๐ญ๐ข๐ต๐ช๐ฐ๐ฏ 40 ๐ฐ๐ง ๐ต๐ฉ๐ฆ ๐๐๐๐๐ (๐๐ช๐ด๐ต๐ช๐ฏ๐จ) ๐๐ฆ๐จ๐ถ๐ญ๐ข๐ต๐ช๐ฐ๐ฏ๐ด, 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 ๐๐ต๐ข๐ฏ๐ฅ๐ช๐ฏ๐จ ๐๐ฐ๐ฎ๐ฎ๐ช๐ต๐ต๐ฆ๐ฆ ๐ฐ๐ฏ ๐๐ณ๐ช๐ฎ๐ข๐ณ๐บ ๐๐ข๐ณ๐ฌ๐ฆ๐ต๐ด (๐๐๐๐) 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. ๐๐ฅ๐ข๐ ๐ข๐๐ข๐ฅ๐ข๐ญ๐ฒ ๐๐ซ๐ข๐ญ๐๐ซ๐ข๐: 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. ๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐๐ฎ๐ฆ๐๐ง๐ญ: 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. ๐๐ข๐ง๐ข๐ฆ๐ฎ๐ฆ ๐๐ฎ๐๐ฅ๐ข๐ ๐๐ก๐๐ซ๐๐ก๐จ๐ฅ๐๐ข๐ง๐ (๐๐๐): The continuous MPS requirements under Rule 19A of the Securities Contracts (Regulation) Rules, 1957ย will continue to apply to Indian issuers, while foreign issuers must maintain a minimum public shareholding of 10%.
4. ๐๐ซ๐ข๐๐ข๐ง๐ ๐ฆ๐๐๐ก๐๐ง๐ข๐ฌ๐ฆ: 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.