For companies that do not immediately need fresh capital, going public need not necessarily mean conducting an IPO. The International Financial Services Centres Authority has proposed a route through which an unlisted company can list equity shares or convertible securities on a recognised IFSC exchange without making a public offer.
The proposal is presently a consultation paper, not a final operational framework. IFSCA has invited comments until August 3, 2026. Here is a lowdown.
Direct listing refers to the admission of a company’s already-issued securities to trading on a recognised IFSC exchange without conducting a public issue. There is no fresh issue of shares to raise capital and no public offer-for-sale through which existing shareholders sell shares to IPO applicants.
Instead, the listing creates a regulated secondary market in which existing shares can subsequently be bought and sold. Equity shares as well as convertible securities are covered by the proposed framework.
Although the consultation paper highlights new-age companies that have expanded using founders’ or institutional capital, the framework is not restricted to start-ups. It may be used by an issuer whose specified securities are not already listed on any exchange in India, the IFSC or overseas. It is therefore a first-listing route, not a simplified mechanism for an already-listed company to obtain another listing.
The company must also satisfy at least one of three eligibility conditions:
consolidated operating revenue of at least $20 million in the latest financial year or averaged over the previous three years;
consolidated pre-tax profit of at least $1 million on the same basis; or
post-listing market capitalisation of at least $50 million.
These are alternative tests, not cumulative requirements.
Direct listing is best viewed as a market-access mechanism rather than a fund-raising mechanism. The company obtains a quoted market price and listed status, but no new money enters its balance sheet at the time of listing.
In a regular IPO, shares are offered to investors through a fresh issue, an offer-for-sale, or both. The process generally involves a price band, book-building, investor bidding, allocation of shares and, in many cases, underwriting.
A direct listing has no public subscription and no allotment to IPO applicants. Its purpose is to admit already-issued securities to exchange trading.
The proposed process will broadly work as follows.
Eligibility and exchange approval: The issuer will first apply for in-principle approval from a recognised IFSC exchange. The exchange must approve or reject a complete application within 15 days, after giving the issuer an opportunity to respond before rejection.
Information Document: Instead of an IPO offer document, the issuer will file an Information Document through an IFSCA-registered investment banker. The banker must conduct due diligence and submit a certificate to IFSCA and the exchange. The document will be publicly hosted on the websites of IFSCA, the exchange, the issuer and the investment banker.
The Information Document must cover the company’s business, capital structure, management, risk factors, financial statements, shareholder agreements, related-party transactions, litigation, regulatory actions and other material information.
Financial disclosures: Normally, at least three years of audited financial information must be supplied. The financial information cannot be more than six months old. Companies using home-country accounting standards other than IFRS, US GAAP or Ind AS will have to reconcile their accounts with IFRS.
Price discovery: Since there is no IPO book-building process, an independent registered valuer will determine a base or reference price. The valuation report cannot be more than three months old. On the listing day, the exchange will hold a special pre-open session to arrive at an equilibrium price from actual buy and sell orders.
Public shareholding: Indian and foreign issuers will have to maintain public shareholding of at least 10 per cent on a continuous basis.
Liquidity support: A company may appoint one or more market makers, although the proposal does not make market-making compulsory.
An IPO distributes shares to the public and may raise money. A direct listing opens an exchange market for securities that already exist.
Direct listing can be useful for mature companies that want the benefits of a stock-exchange listing but do not presently need fresh capital.
First, it can reduce transaction costs by eliminating underwriting, public-issue marketing, bidding and allotment expenses. However, it is not cost-free because the company will still require an investment banker, independent valuer, auditors, legal advisers and continuing compliance systems.
Second, because no fresh shares are issued, the existing shareholders do not suffer dilution merely because of the listing. Their percentage ownership will change only if they subsequently sell shares or the company raises capital later.
Third, listing creates a transparent market price and a possible liquidity route for founders, private equity and venture capital investors, early shareholders and employees holding shares or stock options. The official paper expressly identifies such exit opportunities as one of the reasons companies may choose this route.
Fourth, becoming listed imposes higher disclosure and governance standards. Public financial reporting, risk disclosures and scrutiny by investors can improve transparency and stakeholder confidence.
Fifth, a quoted market value may make future transactions easier. A company could use its listed shares for employee compensation, acquisitions or a subsequent fund-raising exercise. This is a practical consequence of having a market-traded security, although it is not an immediate benefit guaranteed by the proposed circular.
Direct listing is not suitable for a company that needs immediate growth capital. It may also be unattractive where the shareholder base is highly concentrated or where there is insufficient investor interest to sustain active trading.
Listing without a simultaneous public offer is already permitted in several leading markets. The New York Stock Exchange and Nasdaq allow direct listings, the London Stock Exchange permits a similar route known as an “introduction”, and the Tokyo Stock Exchange also permits listings without a public offering.
Globally, direct-listing companies are generally expected to meet substantially the same business, revenue, profitability and governance standards as conventional IPO candidates. However, exchanges frequently impose tougher requirements relating to the value of publicly tradable shares because the absence of an IPO can make liquidity and price discovery more difficult.
For example, the NYSE generally requires at least $40 million of publicly held shares for a conventional public-offer listing. For certain direct listings, its requirements rise to $100 million through the opening auction or $250 million in aggregate publicly held shares. Nasdaq similarly imposes higher market-value requirements for direct listings.
High-profile companies that have taken the route include Spotify, Slack, Palantir, Roblox and Coinbase. The IFSCA paper also lists smaller direct-listing issuers, showing that the mechanism is no longer confined only to the largest technology platforms.
The broader international lesson is that direct listings tend to work best when the company already has:
Without an IPO roadshow, institutional allocations and underwriter support, a lesser-known company may struggle to generate trading interest.
Listing can be created by regulation; liquidity must still be created by investors. Do note a company’s size, acquisition or later transfer to another exchange does not by itself prove that its original direct listing produced deep or stable liquidity.
The proposed framework could expand the supply of equity securities available on IFSC exchanges. It may attract India-linked and overseas companies that want international visibility, public price discovery and listed-company status without undertaking an immediate fund-raise.
More listings would also create business for the broader GIFT City ecosystem, including investment bankers, exchanges, valuers, auditors, lawyers, custodians, brokers, market makers and research providers. The proposal also moves the IFSC closer to international listing practices. Its disclosure requirements draw on IOSCO principles concerning accurate and timely information, equitable treatment of shareholders and internationally acceptable accounting standards.
However, the impact should not be overstated. The success of the framework will depend less on how many companies are technically eligible, and will depend more on whether the exchanges can attract enough buyers, sellers, research coverage and institutional participation.
One of the issues is will the public float be large enough? IFSCA proposes a minimum total market capitalisation of $50 million and minimum public shareholding of 10 per cent. At the lowest permitted levels, this could mean a publicly held float worth only about $5 million. That may be relatively thin for active institutional trading. The consultation paper itself notes that direct listings can face additional liquidity and price-discovery difficulties, while the NYSE and Nasdaq focus heavily on the market value of publicly held shares rather than only the company’s total market capitalisation. Yes, the $50-million threshold filters out very small companies, but it does not by itself ensure a sufficiently large free float.
An optional market maker could reduce bid-ask gaps, but optional market-making cannot replace genuine investor demand.
Thus, the framework can give GIFT IFSC more issuers; whether it delivers deeper markets will depend on the amount of freely tradable stock and the breadth of the investor base
Published on July 16, 2026
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