Expanding Horizons: Facilitating Direct Listings of Indian Companies on Global Stock Exchanges

Abstract

On January 24, 2024, the Indian Government notified the Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024 (‘LEAP Rules’) along with notifying an amendment to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (‘NDI Rules’). This formally approved the direct listing of equity of Indian companies in a foreign jurisdiction, i.e., the International Financial Services Centre in Gujarat International Finance Tec-City, Gujarat. While Indian companies could access foreign debt markets via direct listing, equity capital markets could only be accessed via the route of Depository Receipts. With the new listing norms, companies, especially startups, would be able to take the jurisdictional advantage of GIFT City in order to attract global investors. These rules, coupled with the IFSCA (Issuance and Listing of Securities) Regulations, 2021, read with other relevant legislations lay down a framework for companies wanting to take advantage of being a publicly traded company without having to make an Initial Public Offer. There are, however, certain concerns with regards to lack of clarity in taxation policy, valuation standards, etc. The objective of this paper is, therefore, to: a) Discuss the rise and fall of depository receipts, b) Understand the direct listing of equity shares while analysing various committee reports, c) Identify the GIFT City benefits while highlighting concerns pertaining to the new rules and d) Point out certain global practices.