On 24 January 2024, the Ministry of Corporate Affairs and the Ministry of Finance have notified the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024 ("Overseas Listing Rules") and, vide the FEMA (Non-debt Instruments) Amendment Rules, 2024 ("NDI Rules 2024") (jointly the "January 2024 Notifications"), amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 ("NDI Rules") respectively. The January 2024 Notifications have paved the way for public companies in India to list their equity shares on permissible international stock exchanges in Gujarat International Finance Tec-City – International Financial Services Centre in India ("GIFT-IFSC"). Indian public listed or unlisted companies are permitted for direct listing under this scheme, on the permitted international exchanges on the GIFT-ISC, which are presently the India International Exchange and the NSE International Exchange.
Background
The overseas direct listing scheme has been in the pipeline for several years prior to the January 2024 Notifications. The Securities and Exchange Board of India ("SEBI") Report of the Expert Committee for listing of equity shares of companies incorporated in India on foreign stock exchanges and vice versa dated 4 December 2018 proposed amendments to various laws in order to enable listing of equity shares of companies incorporated in India, on foreign stock exchanges. Thereafter, the Companies (Amendment) Bill, 2020, inter alia, made specific provisions (i.e. Section 5) allowing prescribed class of public companies to list on prescribed stock exchanges in prescribed foreign jurisdictions. The same culminated in Section 5 of the Companies (Amendment) Act, 2020 ("Amendment Act").
In July 2023, the Union Finance Minister announced the decision of the Government of India to permit direct listing of unlisted and listed Indian companies on the stock exchanges in IFSC, after which on 30 October 2023, the MCA notified Section 5 Amendment Act. Through Section 5 of the Amendment Act, Section 23(3) was inserted into the Companies Act, 2013, which allowed certain classes of Indian public companies to list their securities on permitted foreign stock exchanges. However, a detailed framework / rules for operationalization of the said provision was awaited.
Key Highlights
- The Overseas Listing Rules lay down the provisions for applicability, eligibility of Indian public companies and the requirements to be met for the overseas listing of equity shares of eligible companies.
- The NDI Rules now include Chapter X on 'Investment by Permissible Holder in Equity Shares of Public Companies Incorporated in India and Listed on International Exchanges' and Schedule XI – "Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme ("Direct Listing Scheme"), vide NDI Rules 2024 which permits Indian public companies to list their equity shares on international exchanges in IFSC Gift City, in India.
- The Overseas Listing Rules and Direct Listing Scheme along with the IFSCA (Issuance and Listing of Securities) Regulations, 2021 provide an overarching framework for issuing and listing of equity shares of Indian public companies on international stock exchanges in GIFT-IFSC.
- Some of the salient provisions of the Overseas Listing Rules and Direct Listing Scheme are as illustrated below:
| Sr. No. | Specification | Key Provisions |
| 1. | Eligible Companies |
Private Companies are not permitted to list their securities under the Direct Listing Scheme. |
| 2. | Permissible Securities | Equity Shares |
| 3. | Mode of Issuance and Listing |
|
| 4. | Permissible holder / investors |
|
| 5. | Non-Eligible Public Companies | The following public companies are not eligible for listing
their equity shares:
|
| 6. | Foreign Investment Limits | Foreign holding shall not exceed limits prescribed under Schedule I to NDI Rules. |
| 7. | Pricing |
|
| 8. | Regulators |
|
Way Forward
Hereafter the SEBI will also notify guidelines for the overseas listing of Indian public company already listed in India. The notification of the Overseas Listing Rules and Direct Listing Scheme enables Indian companies tap global markets for raising funds. This move will help public companies attract foreign investment and receive enhanced valuations. One can foresee unprecedented growth opportunities and a broader investor base. The Direct Listing Scheme provides Indian companies an opportunity to have a global presence and compete with its global counterparts.
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