Direct Overseas Listing Rules Amendment 2026: Convertible Debentures, Preference Shares at GIFT IFSC

What happened

On 3 November 2026, the Ministry of Corporate Affairs (MCA) notified the Companies (Listing of equity instruments in permissible jurisdictions) Amendment Rules, 2026 (notification G.S.R. 968(E)). The amendment changes the 2024 rules under which Indian public companies can list directly on stock exchanges outside the domestic market, which today means the two international exchanges at GIFT IFSC, Gujarat.

The headline change: companies can now list equity instruments, defined as equity shares, convertible debentures and preference shares issued by an Indian company, instead of only equity shares. The rules also relax some eligibility conditions, including for companies with a negative net worth. They take effect from the date of publication in the Official Gazette.

Background

• Legal basis: Section 23(3) was inserted in the Companies Act, 2013 by the Companies (Amendment) Act, 2020. It lets prescribed classes of public companies issue prescribed securities for listing on permitted exchanges in permissible foreign jurisdictions.
• January 2024 framework: The MCA notified the Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024 by G.S.R. 61(E) dated 24 January 2024. They were last amended by G.S.R. 443(E) of 3 July 2025, before the present change.
• FEMA side: The Direct Listing Scheme sits in Schedule XI of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. According to the Government's January 2024 FAQs, only non-residents ("permissible holders") can invest or trade in such shares; Indian residents and Indian mutual funds cannot.
• Exchanges and regulator: The permitted international exchanges are India International Exchange (India INX) and NSE International Exchange (NSE IX), both in GIFT IFSC and regulated by the International Financial Services Centres Authority (IFSCA).

Key details

The rules are made under section 23(3), read with section 469, of the Companies Act, 2013. The QIB allotment must follow the regulations of the securities regulator in the permissible jurisdiction.

Why it matters

• Wider toolkit for fund-raising: Companies can offer hybrid instruments such as convertible debentures and preference shares, not just plain equity, to foreign investors at GIFT IFSC.
• Firms with negative net worth: The relaxation opens a route for companies whose liabilities exceed their assets, provided most of the issue goes to institutional buyers. Amit Baid of BTG Advaya said this could draw high-growth start-ups and capital-intensive businesses that need funding before they turn profitable. Anjali Malhotra of Nangia Global told PTI that the QIB condition protects the investing public.
• Exit for early investors: Suresh Swamy of Price Waterhouse & Co LLP told PTI that moving from "shareholders" to "holders" could give private equity and venture capital funds holding preference instruments an exit route.
• Regulatory alignment: Malhotra said the changes bring the MCA rules in line with the existing IFSCA listing regulations.
• GIFT IFSC's role: The Government's 2024 FAQs describe the aim of IFSC as "onshoring the offshore", that is, bringing India-related financial business back home.

Issues and criticism

• Other laws must keep pace: Amit Baid of BTG Advaya told PTI that the "regulatory door has been opened", but actual capital flows will depend on how fast the FEMA and tax frameworks adapt; investors want certainty on exit and taxation.
• Investor protection: Relaxing the negative net worth bar raises risk for buyers. The rules answer this by limiting such issues mainly to QIBs.
• Limited pool of buyers: Under the FEMA scheme, Indian residents cannot buy these securities, so demand depends on foreign investors at GIFT IFSC.
• Uptake still to be seen: The notification does not say how many companies have used direct listing since 2024, so its effect will show only in actual issues.

Way forward

• Matching changes in the FEMA Direct Listing Scheme and tax rules, so that convertible debentures and preference shares are treated clearly.
• Clear IFSCA and exchange rules on disclosure for loss-making issuers.
• Early guidance for listed companies and investors on conversion, exit and reporting.

Prelims pointers

• Notified by the Ministry of Corporate Affairs on 3 November 2026 as G.S.R. 968(E).
• Parent law: section 23(3) of the Companies Act, 2013, inserted by the Companies (Amendment) Act, 2020.
• "Equity instruments" = equity shares, convertible debentures, preference shares.
• Negative net worth companies eligible if at least 75% of the net offer goes to QIBs.
• Waiting period after making good a default on dues to banks or secured creditors cut from two years to more than six months.
• Prospectus filed with the Registrar in Form LEAP-1.
• Permitted international exchanges: India INX and NSE IX, both at GIFT IFSC, regulated by IFSCA (set up under the IFSCA Act, 2019).
• FEMA basis: Schedule XI, Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

One-liners for SSC, Banking and Railways

• The Ministry of Corporate Affairs amended the overseas listing rules in November 2026.
• Indian companies can now list convertible debentures and preference shares at GIFT IFSC.
• GIFT IFSC is in Gujarat.
• IFSCA is the unified regulator for financial services in IFSCs.
• QIB stands for qualified institutional buyer.

Revise more economy updates in the weekly current affairs quiz.

Mains practice question

"The 2026 amendment to India's direct overseas listing rules widens the instruments and companies that can list at GIFT IFSC. Discuss its potential and the safeguards needed." (GS III, 250 words)

Points to cover: 1. Framework: section 23(3) of the Companies Act, 2024 MCA rules, FEMA Schedule XI, IFSCA as regulator. 2. Changes: equity instruments, negative net worth with 75% QIB condition, shorter default cooling-off, IFSC-based companies. 3. Benefits: capital for start-ups and capital-intensive firms, investor exits, "onshoring the offshore". 4. Concerns and safeguards: FEMA and tax alignment, investor protection, disclosure norms.