UPDATE ON DIRECT LISTING OF INDIAN COMPANIES ON IFSC EXCHANGES

Question 1

WG Report

Answer 1

Pursuant to the recommendations in the WG Report, the DEA amended the NDI Rules on
January 24, 2024, by introducing the ‘Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme’ (‘Scheme’), and the MCA issued the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024 (‘LEAP
Rules’) under the Companies Act, 2013).

Question 2

Listed Indian Company and IE:

Answer 2

The definition of ‘listed Indian company’ under the NDI
Rules has been amended to include an Indian company that has its equity or debt
instruments listed on an International Exchange (‘IE’) in the IFSC (i.e., India International
Exchange and National Stock Exchange (‘NSE’) International Exchange).

Question 3

Issue and Listing on IE on par with RSE

Answer 3

Equity shares of Indian public companies listed on an IE are to be in demat form, treated pari passu with equity shares listed on a
Recognised Stock Exchange in India (‘RSE’) and will be subject to the applicable provisions
of the NDI Rules and Regulations.

Question 4

Permissible Holder

Answer 4

The Scheme permits investment by a ‘permissible holder’ in equity
shares of a public company that are listed or to be listed on an IE. A permissible holder is a person who is not a person resident in India and includes a beneficial owner.

A permissible holder, who is not a person resident in India, will require approval from the
Central Government if it is a citizen of entity incorporated in, or entity whose beneficial owner
is from, a country which shares a land border with India.

Question 5

Voting

Answer 5

Voting rights on equity shares listed on IE will be exercised directly by the permissible holder or through its custodian, pursuant to voting instructions from the
permissible holder.

Question 6

Pricing

Answer 6

(a) Equity shares of an Indian company already listed on an RSE in India can be listed on an
IE at a price which is not less than the price applicable to a corresponding mode of issuance
of equity shares listed on an RSE under applicable laws;

(b) In case of an initial listing of equity shares on an IE, the listing price is to be determined
pursuant to the prescribed book-building process, and cannot be less than the fair market value calculated as per the Foreign Exchange Management Act, 1999; and

(c) Subsequent issuances or transfers of equity shares
for the purpose of listing additional equity shares on an IE would be based on applicable pricing norms of the IE.

Question 7

LEAP Rules

Answer 7

The LEAP Rules apply to unlisted Indian public companies, which issue their securities for listing on such permitted stock exchanges in permissible jurisdictions. The
LEAP Rules also apply to listed Indian public companies undertaking such issuances,
subject to compliance with regulations prescribed by the Securities and Exchange Board of
India (‘SEBI’) or the International Financial Services Centres Authority.