The finance ministry has issued a notification reducing the public shareholding requirement for listing shares on the stock exchanges in GIFT City. After implementation of this notification, the companies can list on the GIFT City stock exchange with a minimum of 10% of the public shareholding. Previously, the requirement was 25% for continued listing on the Indian stock exchanges and GIFT City stock exchanges.

Necessary amendments have been made in the Securities Contracts Regulations Rules (SCRR), 1956 to make the necessary changes in the listing requirements. The companies will be able to seek listing on international exchanges in the International Financial Services Centres (IFSCs).

Implications of Change in Shareholding Requirement

The change in shareholding requirements for listing on GIFT City stock exchange will open the doors of global capital for Indian companies and startups. This is highly beneficial for companies that are looking to go international and expand their business in international markets.

Additionally, this change will encourage foreign investors to invest in Indian companies while also allowing the Indian companies to retain the necessary control. Foreign investments will further boost the foreign exchange inflows. However, there is also a concern that a reduction in the public float (shares held by the public) will result in a smaller number of shares being available to the public. Smaller public float can also result in pump and dump schemes, leading to price manipulations.

In order to allow the listing, the IFSC authorities will issue the necessary norms surrounding disclosure norms, net worth requirements, eligibility requirements, accounting standards, reporting standards sustainability reporting etc. As per a regulatory official, these norms are expected to be at par with the global standards while having similarities to the norms set by SEBI on listing and disclosure requirements.

One of the proposals from IFSCA has recommended exemption from the requirement of seeking an observation letter or approval from the authority in cases where the issue size is $100 million or less. Indians who have set up offshore companies registered overseas have shown interest following the change. As of June 2024, approximately 80 broker-dealers are registered in IFSC. 5 new approvals were granted in that quarter along with 22 clearing members. However, it only has 3 registered investment bankers.

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