GIFT city gears up for direct listings, re-insurance
Nov 30, 2023
Gujarat International Finance Tec-City, India’s newest financial hub and a flagship project of Prime Minister Narendra Modi, is preparing for its next phase of growth.
The first phase followed the creation in 2020 of a new regulator, the International Financial Services Authority, which outlined an ambition to create a welcoming place where India-centric trading that’s moved to Dubai, Mauritius or Singapore can return home.
K Rajaraman, who took charge as chairman of the IFSCA in August, spoke with Bloomberg News about the outlook for GIFT City.
How has GIFT developed since the creation of the IFSCA?
GIFT City started in 2007 as a completely greenfield experiment when PM Modi was the chief minister of the state of Gujarat. In 2020 the government created the IFSCA as a unified regulator. It has issued more than 30 regulations for industries including aircraft leasing, ship leasing. In the financial domain we have banks, funds, capital markets and insurance.
The number of licensed/registered entities has grown to more than 550 in September 2023 versus 129 in the same month of 2020. We have more than 25 banks, up from 13 in 2020. We have two international stock exchanges offering 20-plus hours of trading in various product categories including index, stock, currency and commodity derivatives.
What does it indicate for the debt market?
Cumulative debt listing at GIFT IFSC stock exchanges was at $52.7 billion as on Sept. 30, 2023. Out of which $10.18 billion of debt listing was related to environment, social and governance bonds. We expect the GIFT IFSC bond market to gain traction as inflation and interest concerns abate.
How will you simplify processes?
The idea is to create a fairly level playing field for a global player to come here and to provide a fair amount of tax certainty, policy certainty, and also ease of doing business. We are now in the process of launching a single window IT system, which will enable entities to obtain all (regulatory) clearances in a single window. This will likely be launched sometime in January.
What are your plans for growth?
One: Direct listing of the securities of unlisted Indian companies at the IFSC based exchanges. Two: Enable IFSC to become a Re-insurance hub. Three: Enabling bookkeeping, accounting, taxation and financial crime compliance services as finance services in the international financial center. Four: Single window IT System for registration and approval of entities in GIFT IFSC. Five: Permitting acquisition financing. Besides, there are others like entry for foreign universities that want to set up campuses, transition finance.
We are in the process of rolling out a payment services regulation, enabling instant clearances for banks, which will reduce the friction for the financial ecosystem out here. It may take about six months or so.
Then there are our plans for the pensions sector. There are millions of people in the Indian diaspora who are working abroad and many of them would like to save in dollars. This is an opportunity for us. A team is working on it and is likely to submit a report maybe by December after which we are likely to come out with a set of pension regulations wherein people can do their pension savings out of this place.
What benefits do you see from direct listings?
We see a lot of unlisted companies in India, typically startups, tech companies. They do not generally get those kind of valuations which they obtain in international marketplace. So we would expect them to come and list out of this place because there’ll be more traction for foreign players to come and buy stocks, which are denominated in foreign currencies. We expect the finance ministry to notify those regulations shortly.
What are your two big challenges?
Sudden surge in number of applications at the GIFT IFSC has outpaced the infrastructure development, but significant inventory is expected to be out in near future. IFSCA has dual role of regulator as well as developer. It is important for all stakeholders to maintain the coherent approach and deliver efficiently and fast. We expect to maintain the momentum.
Will GIFT IFSC look at carbon credits?
There are two committees, formed more than a month ago, which are looking at the voluntary carbon credit market because India is a large producer of carbon credits. So it exports a lot of carbon credits. So here is an opportunity for us to actually provide a international trading platform for carbon credits. So we are working on that. We expect that committee maybe in the next month or two to produce a report.
[Bloomberg]
