SCRR 1956 A Pathway to Global Capital for Indian Start Ups

SCRR 1956 A Pathway to Global Capital for Indian Start-Ups. The Department of Economic Affairs, Ministry of Finance, has taken a significant step to strengthen India’s financial system by amending the Securities Contracts Regulation Rules (SCRR), 1956. This amendment is crucial for Indian companies, especially start-ups and those in the technology sector, as it facilitates their direct listing on international exchanges within International Financial Service Centres (IFSCs).

SCRR, 1956 A Pathway to Global Capital for Indian Start-Ups

SCRR, 1956 A Landmark Decision

The amendment to the SCRR, 1956, announced on August 29, 2024, simplifies the listing process for Indian companies that seek to list their securities on international exchanges, particularly at GIFT IFSC (Gujarat International Finance Tec-City International Financial Services Centre). This decision marks a significant shift in India’s approach to global financial markets.

Key Highlights of the SCRR, 1956 Amendment

1. Direct Listing of Equity Shares:
   • Indian companies can now directly list their equity shares on international exchanges in IFSCs.
   • The regulatory framework for this has been established under the ‘Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme’ as per the Foreign Exchange Management (Non-Debt Instruments), 2019 and Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024.
2. Minimum Public Offer:
   • Companies wishing to list on international exchanges must offer at least 10% of their post-issue capital to the public.
   • This threshold has been set to ensure a robust and fair market presence.
3. Continuous Listing Requirements:
   • The continuous listing requirement is also pegged at 10%, ensuring that companies maintain a consistent and transparent market presence.
   • This aligns with the global standards outlined under Rules 19 (2)(b) and 19A of the SCRR.

Why This SCRR 1956 Matters

This amendment is not just a procedural change; it is a strategic move aimed at positioning India as a global financial hub. Here’s why this change is pivotal:

1. Access to Global Capital:
   • Indian start-ups and companies in sunrise sectors (new and rapidly growing industries) can now tap into international markets more easily.
   • This provides them with opportunities to raise capital on a global scale, which is essential for growth and expansion.
2. Encouraging Innovation:
   • By easing access to international exchanges, the amendment encourages innovation and entrepreneurship in India.
   • Companies in the technology sector, in particular, stand to benefit from the global exposure and funding opportunities.
3. Strengthening IFSCs:
   • The amendment bolsters the role of IFSCs like GIFT City in India’s financial ecosystem.
   • It positions these centres as key players in the global financial system, offering a world-class regulatory environment.
4. Government’s Commitment to Reform:
   • This move underscores the Indian Government’s commitment to providing an agile, responsive, and world-class business environment.
   • The amendments are a clear signal that India is open for business and ready to compete on the global stage.

Impact on Indian Start-Ups and Technology Companies

The amendment is expected to have a profound impact on Indian start-ups and companies in the technology sector. Here’s how:

1. Easier Access to International Markets

• Start-ups often face challenges in raising capital domestically due to market constraints.
• The amendment provides them with an alternative by allowing them to list directly on international exchanges.
• This not only provides access to a broader investor base but also helps in securing better valuations.

2. Attracting Foreign Investment

• By listing on international exchanges, Indian companies can attract foreign investment more easily.
• This is particularly important for start-ups and technology companies, which require significant capital to scale operations and enter new markets.

3. Boosting Innovation and Growth

• The ability to raise capital from international markets will enable start-ups to invest in research and development.
• This, in turn, will drive innovation, helping India maintain its position as a leader in the global technology landscape.

4. Enhancing Global Competitiveness

• Indian companies listed on international exchanges will gain greater visibility and credibility.
• This will enhance their competitiveness in the global market, opening up new opportunities for collaboration and expansion.

GIFT IFSC: A Gateway to Global Financial Markets

GIFT IFSC, located in Gujarat, is poised to become a major player in the global financial system. The amendment to the SCRR, 1956, is expected to enhance the attractiveness of GIFT IFSC as a destination for international listings.

Key Features of GIFT IFSC:

1. World-Class Infrastructure:

• GIFT IFSC offers state-of-the-art infrastructure and a regulatory environment on par with global standards.
• This makes it an ideal location for international financial transactions and listings.

1. Favorable Regulatory Framework:

• The regulatory framework at GIFT IFSC is designed to facilitate ease of doing business.
• The amendments to the SCRR, 1956, are a testament to the Government’s commitment to maintaining a business-friendly environment.

1. Strategic Location:

• GIFT IFSC is strategically located, offering easy access to global markets.
• Its proximity to major Indian cities makes it a convenient hub for financial activities.

Strengthening India’s Position in the Global Financial System

The amendment to the SCRR, 1956, is a significant step towards strengthening India’s position in the global financial system. By facilitating the direct listing of Indian companies on international exchanges, the Government is paving the way for greater integration with global markets.

Key Benefits of the Amendment:

1. Increased Global Presence:

• Indian companies will have a greater presence on the global stage, enhancing their visibility and credibility.
• This will also help in building stronger relationships with international investors.

1. Improved Market Confidence:

1. Enhanced Competitiveness:

• By aligning with global standards, the amendment ensures that Indian companies are competitive on the international stage.
• This will also help in attracting foreign companies to list at IFSCs like GIFT City.

1. Economic Growth:

• The ability to raise capital from international markets will drive economic growth by enabling companies to invest in expansion and innovation.
• This will have a positive impact on job creation and overall economic development.

Conclusion

• The Department of Economic Affairs’ amendment to the Securities Contracts Regulation Rules (SCRR), 1956, marks a significant milestone in India’s financial landscape. By facilitating the direct listing of Indian companies on international exchanges, the Government is opening up new avenues for growth and investment.
• This amendment will significantly impact Indian start-ups and technology companies, equipping them with the tools they need to compete on the global stage.
• With a robust regulatory framework in place and the support of IFSCs like GIFT City, India is well on its way to becoming a major player in the global financial system.
• The future looks promising for Indian companies as they embark on this new journey towards global integration and success.