The Ministry of Finance recently amended the Securities Contracts (Regulation) Rules, 1957 (SCRR) through a notification dated 28 August 2024. These amendments aim to simplify listing requirements for Indian public companies on international exchanges located within International Financial Services Centres (IFSCs), making it easier for Indian companies to access global capital.
The key changes are as follows:
- Minimum Public Offer – Under Rule 19(2)(b) of the SCRR, Indian companies are required to offer at least 25% of their post-issue capital to the public when listing on recognized stock exchanges. The recent amendment reduces this requirement to 10% for companies listing on international exchanges within IFSCs. Furthermore, the varying public offer thresholds based on a company’s post-issue capital size will not apply to listings on recognized exchanges in IFSCs.
- Continuous Listing Requirement – Rule 19A of the SCRR mandates that public listed companies maintain a minimum public shareholding of 25%, along with a timeline to meet this threshold. The amendment lowers this requirement to 10% for companies listed on recognized stock exchanges within IFSCs.
Interest Equalization Scheme on Pre and Post Shipment Rupee Export Credit
The companies whose public shareholding falls below 10% due to a resolution plan under the Insolvency and Bankruptcy Code, 2016, are typically required to restore their public shareholding to 10% within 12 months. This requirement will no longer apply to companies listed on stock exchanges in IFSCs.
The Government of India, through Trade Notice No. 07/2024-2025 dated June 28, 2024, and Trade Notice No. 08/2024-2025 dated July 10, 2024, has extended the Interest Equalization Scheme for Pre and Post Shipment Rupee Export Credit (“Scheme”) until August 31, 2024. This extension is effective from July 1, 2024, and will conclude on August 31, 2024.
Additionally, the Government has introduced the following modifications to the Scheme:
- Eligibility of Borrowers: Starting from July 1, 2024, only MSME Manufacturer Exporters will be eligible for the Scheme. As a result, non-MSME exporters will no longer be eligible, and their claims will not be accepted beyond June 30, 2024.
- Cap on Subvention Amount: The interest equalization benefit will be capped at ₹1.66 crore per Importer-Exporter Code (IEC) for the extended period of the Scheme.
Scheme for Trading and Settlement of Sovereign Green Bonds in the IFSCA
The Scheme applies to investments in Sovereign Green Bonds issued by the Government of India, made by eligible investors in the IFSC (International Financial Services Centre) in India. The following categories of investors are eligible to participate in the Scheme:
- Persons residing outside India who are eligible to invest in the IFSC, as specified by the IFSCA, and are not incorporated in High-Risk Jurisdictions identified by the FATF for a Call for Action.
- An IBU (International Banking Unit) of a foreign bank that does not have a branch or subsidiary licensed to conduct banking business in India.
- Persons residing outside India, as defined under the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015, who are eligible to invest in the IFSC, as specified by IFSCA, and are not incorporated in High-Risk Jurisdictions identified by the FATF, provided that such persons are not a branch, joint venture, subsidiary, or trust of an entity incorporated in India.
In addition, funds or schemes, including those established by entities incorporated in India and regulated by IFSCA under the IFSCA (Fund Management) Regulations, 2022, are considered eligible investors under the Scheme. An IBU of an Indian bank or a foreign bank (provided the foreign bank has a branch or subsidiary licensed to conduct banking business in India) is also eligible to participate in the Scheme (“Eligible IBU“). Sovereign Green Bonds issued by the Government of India (“Securities“) are eligible for investment under the Scheme, subject to the following conditions:
- Investments in Sovereign Green Bonds designated as ‘specified securities’ under the Fully Accessible Route (FAR) will be governed by the provisions of A.P. (DIR Series) Circular No. 25 dated March 30, 2020, as amended.
- Investments in Sovereign Green Bonds not designated as ‘specified securities’ under FAR will be subject to the investment limits prescribed for Foreign Portfolio Investors (FPI), as per A.P. (DIR Series) Circular No. 03 dated April 26, 2024, and the conditions for FPI investments outlined in A.P. (DIR Series) Circular No. 31 dated June 15, 2018, both as amended.
Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard.
