GIFT City eyes direct listings without IPO to deepen equity market, says IFSCA's Pradeep Ramakrishnan

GIFT City, located in Gujarat, India, is poised to revolutionize its equity market by introducing a direct-listing framework without the need for traditional initial public offerings (IPOs), according to Pradeep Ramakrishnan, Executive Director at the International Financial Services Centres Authority (IFSCA). The new framework, set to be introduced in the coming months, will allow companies to list their shares directly, making them available for trading without undergoing a conventional IPO process.

Ramakrishnan emphasized that there is no requirement to go through a traditional IPO route; instead, companies will be automatically onboarded as listed entities, and their shares will become tradable immediately. This move is part of a broader strategy to bolster the equity market at GIFT City, which has shown promise in the bond market, having raised nearly $85 billion through bond issuances, including $18 billion in green, social, and other sustainable bonds.

The financial hub has also emerged as a crucial pathway for Indian companies seeking to raise capital overseas, with approximately 75% of India's external commercial borrowings (ECBs) passing through GIFT City. Additionally, retail participation in GIFT City's global investment platform is expanding, with nearly 3 million Indians already registered under the revamped global access programme.

This scheme enables Indian investors to engage in investments across about 50 countries through local brokers, with a yearly remittance limit of $250,000, as per the Reserve Bank of India's Liberalised Remittance Scheme.

Domestic mutual fund houses are also leveraging GIFT City as a conduit for overseas investment, given their $7 billion cap on global investments, which does not apply to their operations within GIFT City. Around 10 to 12 fund houses have already established a presence in the financial centre, offering Indian investors access to global markets with minimum ticket sizes starting at $500.

GIFT City is also making strides in the gold market, working towards transitioning more transactions from over-the-counter (OTC) markets to exchanges, aligning with the regulator's efforts to enhance market transparency. India, being a significant importer of gold, finds this development crucial for influencing gold pricing. So far, about 110 tonnes of gold and 1,200 tonnes of silver have been imported through GIFT IFSC.

In the realm of sustainable finance, IFSCA recently unveiled a framework for blended finance, facilitating the pooling of philanthropic capital and grants alongside funds from regular investors, all subject to Foreign Contribution Regulation Act (FCRA) guidelines. Banks operating within GIFT City are mandated to allocate 5% of their incremental lending towards sustainable finance initiatives, which has resulted in lending of approximately $8 billion to date.

Since its establishment six years ago, GIFT IFSC has seen a steady growth, with over 1,400 registered entities spanning 25 to 30 business lines, including 235 fund management entities managing more than 400 funds. The financial centre has also witnessed leasing of about 500 aircraft assets and 42 ships, and four foreign universities have set up campuses there.

Ramakrishnan attributed GIFT City's expansion to India's demographic dividend, economic growth trajectory, and the nation's goal of achieving developed status by 2047, highlighting that the center is an attractive magnet for investors and issuers alike.