Posted on: December 2, 2021 | By: Sharda Balaji, Founder, NovoJuris Legal & Kaushik Kumar- Associate, Novojuris Legal
As one of the largest and fastest growing economies, India has been a major consumer of international financial services. The committee report set up by the Ministry of Finance, the Percy Mistry Committee Report way back in 2007 had estimated that even under conservative assumptions, purchases by Indian households and firms of IFS will be nearly $50 billion by 2015, and could exceed $120 billion by 2025. The objective was to capture the international financial service business generated from India to be undertaken from India and gradually emerge as an international financial services hub at the regional and global level. The Government of India operationalized India’s maiden International Financial Services Centre (IFSC) at GIFT Multi Services SEZ in April 2015.
The International Financial Services Centres Authority Act was passed in December 2019 and the IFSCA commenced its operation as a unified regulator in October 2020. The IFSCA has been vested with the combined powers of four domestic regulators namely RBI, SEBI, IRDAI and PFRDA and has a mandate to develop and regulate financial institutions, financial services, and financial products within the IFSCs in India.
Two of India’s largest exchanges namely Bombay Stock Exchange (BSE) and NSE have set up international exchange and clearing corporations at GIFT IFSC. The exchanges provide more than 140 products for trading.
International Financial Services Centres Authority (Issuance and Listing of Securities) Regulations, 2021:
The International Financial Services Centres Authority (IFSCA) vide its notification no. IFSCA/2021-22/GN/REG015 dated 16 July 2021 has notified the International Financial Services Centres Authority (Issuance and Listing of Securities) Regulations, 2021. The key points of the regulation are:
These regulations shall apply to:
Listing of securities
The following entities shall be eligible to list its securities under these regulations on a recognised stock exchange at IFSC:
Notwithstanding sub-regulation (1) above, the following entities shall also be eligible in respect of listing of debt securities on a recognised stock exchange:
Initial Public Offer (IPO) eligibility criteria
An issuer shall be eligible to make an initial public offer only if:
The issuer shall determine the pricing in consultation with the lead manager(s). The issue may be through a fixed price mechanism or through book building mechanism and the same shall be suitably disclosed in the offer document.
For the offer to be successful, the following conditions shall be satisfied
IFSCA through its latest set of regulations has brought in a comprehensive regulation for issuance and listing framework at the IFSC. We believe that this should help several companies to launch their primary issuances like an IPO or even modern structures like a Special Purpose Acquisition Companies (“SPAC”) to attract monies from foreign investors and non-resident Indians for listing on GIFT IFSC Exchanges.
The latest framework has several new concepts being introduced in India (Indian IFSC) including SR shares (superior voting rights), fast-track Follow-on Public Offers (FPOs), listing of SPACs, ESG debt securities.
This regime combined with capital gains tax exemption available in IFSC could prove to be a big draw for international investors and NRIs in participating in IPOs and trading in listed securities in the IFSC.
The eligibility criteria for IPO requires issuer should have operating revenue of at least USD 20 million in the preceding financial year and an average pre-tax profit, based on consolidated audited accounts, of at least USD One million during the preceding three financial years is a high threshold for some of the small companies. We believe that IFSCA should also deliberate on a listing regulations for SME companies and startups.