Corporate Affairs Ministry Revises Rules for Direct Overseas Listing on IFSC Exchanges

The Corporate Affairs Ministry has revised rules governing the direct listing of equity shares by Indian companies on international exchanges. Announced in New Delhi, the regulatory update builds upon the January 2024 direct listing scheme established for the India International Exchange and the NSE International Exchange, both located within the International Financial Services Centre (IFSC) in India.

Under the revised notification, the definition of equity instruments has been broadened. Equity instruments now officially include equity shares, convertible debentures, and preference shares issued by an Indian company.

The amendments also introduce relaxed eligibility criteria for companies facing certain financial constraints. Specifically, a company with a negative net worth is now eligible to issue equity instruments for listing, provided the issuer undertakes to allot at least 75 percent of the net offer to qualified institutional buyers. Additionally, for entities that have defaulted on payments to banks, public financial institutions, non-convertible debenture holders, or other secured creditors, the disqualification period has been revised from two years down to more than six months.

Industry experts have noted that the changes broaden the overseas listing framework. Abhimanyu Bhattacharya, Partner at Khaitan & Co., stated that the amendments permit a wider category of equity instruments, extend eligibility to certain IFSC-based public companies, and ease listing restrictions while maintaining investor protection safeguards. He added that the changes are expected to facilitate greater access to international capital markets for Indian firms.

Dilip B Desai, Chairman of DHC – Desai Haribhakti, observed that expanding the range of eligible securities and allowing more companies to participate through IFSCs provides businesses with greater flexibility to raise funds and engage with international investors. He noted that the inclusion of convertible debentures and preference shares, alongside relaxed eligibility norms, helps create a more inclusive fundraising framework that enhances the attractiveness of IFSCs and integrates India more closely with global capital markets.

Sunil Narula, Principal Lawyer at Naroola & Narula, also described the amendment as a progressive step for cross-border capital markets through GIFT IFSC. He highlighted that the relief provided to companies with negative net worth and the framework for addressing certain defaults make the GIFT IFSC a more competitive and attractive destination for international fundraising.

According to the Finance Ministry, the direct listing scheme establishes a regulatory framework designed to enhance the global competitiveness of Indian companies. The Ministry stated that the policy serves as an alternative channel for capital mobilization, enabling Indian enterprises to access global markets, achieve improved valuations, broaden their investor base, and strengthen their global footprint.

"The revision of direct listing rules by the Corporate Affairs Ministry is a welcome step for Indian businesses looking to tap into global capital. By broadening the definition of equity to include convertible debentures and preference shares, and by providing practical entry paths for companies with negative net worth or manageable defaults, the government is making GIFT IFSC a more viable fundraising destination. This flexibility will help growing enterprises diversify their capital sources and scale internationally." — Dr. Shishir Gupta, Founder & CEO, StartupLanes