India's Gujarat International Finance Tec-City, or GIFT City, is set to get its first equity listing as early as September, but it may be a while before it sees any meaningful listings and trading.
NSE International Exchange, a subsidiary of the National Stock Exchange of India in GIFT City, has received proposals from several companies, people with knowledge of the situation said. An "unlisted company providing services" is likely to bring the first foreign currency-denominated IPO, said one of the people, who added that the company is in the process of filing a draft prospectus.
No other details were given on the issuer, the deal size or the banks involved.
GIFT City, in the home state of prime minister Narendra Modi, and is an international financial centre that offers tax benefits and looser regulations to enable cross-border business.
In 2023, the Indian government first announced a plan to allow both listed and unlisted companies to list on exchanges in GIFT City.
Currently, Indian companies can list on foreign exchanges only through depositary receipts. Locally, they list on the NSE and BSE (formerly Bombay Stock Exchange), which operate NSE IX and the India International Exchange, respectively, in GIFT City.
Trading on the exchanges is limited to the GIFT Nifty index, formerly SGX Nifty, stock and currency derivatives and debt securities.
Easier rules, a single regulator and tax concessions make a GIFT City listing attractive, particularly for companies that want to raise foreign currency and those looking to list overseas, according to an industry source.
"The regulatory requirements on Nasdaq are far tougher to comply with and it will be easier to sell an IPO on GIFT City's International Financial Services Centre," a Mumbai-based ECM banker said.
The minimum free-float on GIFT City exchanges is 10% compared with 25% on NSE and BSE mainboards, and IPO shares can be sold to just one investor, compared with the requirement to sell to 1,000 investors, including retail, in an onshore float. The offer can also stay open for just one day compared with three days in a domestic IPO. The lockup for controlling shareholders is lower at six months compared with six to 18 months in a domestic all-secondary IPO and one to three years in a float with a combination of primary and secondary shares.
The International Financial Services Centres Authority is the sole regulator for issuers in GIFT City, which could make the approval process quicker than onshore deals. Typically, issuers planning domestic IPOs have to seek the approval of the Reserve Bank of India if the issuer is from the financial sector and Insurance Regulatory Development Authority of India if the issuer is from that sector, in addition to the Securities and Exchange Board of India.
The biggest attraction for investors is that there is no capital gains tax, securities transaction tax, commodities transaction tax or stamp duty, according to analysts. Investors also need not provide their unique income tax filing number.
"The light-touch compliance is bound to attract hedge funds, non-resident Indian investors and other long-only investors," the industry source said.
Listed company support
Still, market participants are not convinced that equity listings in GIFT City will take off in a significant way. "There may be a technical listing here and there to show support for the government's initiative but it will take a long time before commercially viable listings happen. I don't see an easily traversed path," another Mumbai-based ECM banker said.
Among India's more than 30 investment banks, ICICI Securities, HSBC, Pantomath Global Financial Services and SPEC Finance have registered with the IFSCA to start investment banking activities in the hub.
Market participants said listing volume will pick up only if existing listed companies are allowed to list there through follow-on offerings.
Sebi is working with the IFSCA to finalise the rules to allow India-listed companies to list in GIFT City. "The final rules will be ready this quarter," one of the people said.