It has been over a decade since the Gujarat International Finance Tec (GIFT) City was launched and two years since it got the approval for direct listings. Yet only one company is set to make its debut here. If one is to weigh, the number of challenges of GIFT City to attract emerging listings would be as many as the cons.
Major advantages of the platform include a 10-year tax holiday, zero capital gains tax for non-resident Indians on specified transactions, and exemptions from securities transaction tax (STT), goods and services tax (GST), and stamp duty. Now one may ask, why no striking response from startups to get listed despite these trump cards?
There are enough reasons for that too. Illiquidity, lack of deeper investor and institutional base, jurisdictional overlaps, and absence of regulatory clarity are some of them.
Over half a dozen legal experts FE spoke to echoed that liquidity is one of the biggest challenges for GIFT City. “Public markets only work well when issuers have confidence that their shares will trade in sufficient volume and at fair value,” Supreme Waskar, managing partner at Supreme Law Partners, said. Without that, even a well-designed listing framework will struggle to attract quality issuers, he added.
Not just investors, but service provider participation too is low. There are only about 90-100 broker dealers in the International Financial Services Center (IFSC) compared to around 4,900 registered onshore stockbrokers. Experts said that these challenges deter Indian companies, mostly driven by private equity firms, from choosing offshore ecosystems.
“Indian investors would rather participate in onshore listed options than use their LRS (Liberalised Remittance Scheme) limits,” Paras Parekh, partner at CMS INDUSLAW, said. Under the LRS system, resident individuals are allowed to freely remit up to $250,000 per financial year for any permissible current or capital account transaction or a combination of both.
To encourage participation, a few methods can be adopted, such as exempting investment in IFSC stocks by residents from the LRS limits, reducing profit after tax limits for eligibility, enabling quick secondary listings by already listed companies both onshore and abroad, Parekh added.
Ecosystem maturity is another reason for the lukewarm response to GIFT City listing. Experts said that institutional players, merchant bankers, and emerging entities are familiar with the domestic listing routes while GIFT City’s equity products are still in early stage.
Regulatory, legal challenges
There are regulatory and jurisdictional issues that are discouraging companies to enter the Gujarat-based financial hub. One of the key challenges here is the regulatory overlap from two different regulators – Securities and Exchange Board of India (Sebi) and International Financial Services Centres Authority (IFSCA).
IFSCA regulates everything that happens inside GIFT City. However, if a company is already listed under Sebi-regulated stock exchanges in India, they will have to follow the Indian regulator’s norms too. “This creates double compliance and confusion. This needs to be streamlined,” Rajul Bohra, partner at JSA Advocates & Solicitors, said. For already listed companies in India, Sebi is yet to finalise guidelines to fully operationalise direct or dual listing on IFSC exchanges.
Though the IFSCA was established in 2020, it took even more years to crystallize the specific framework for listing of securities. It was in August 2024 that its Listing Obligations and Disclosure Requirements Regulations were notified. This means that for the better part of GIFT City’s existence, issuers had no clear, tested regulatory pathway to list equity on IFSC exchanges, Bohra added.
Also, the IFSCA Direct Listing Scheme became active only in 2025. This allows Indian entities to get directly listed on GIFT City exchanges without simultaneously doing a public issue in India.
The legal system is also still evolving. GIFT City does not have a dedicated arbitration or mediation body to handle disputes. In that case, investors, especially foreign players, will have to settle matters through regular Indian courts, which could take longer time. “Beyond the legal framework, the operational ecosystem required to support listings, custodians, prime brokers, legal advisors with IFSC-specific expertise, investment bankers with international distribution networks are still developing at GIFT City,” Bohra said.