GIFT City’s IPO push faces teething issues

GIFT City's ambitious plans to become a preferred hub for share listings suffered a setback after last week's withdrawal of XED Executive Development’s Rs 110 crore Initial Public Offerings (IPOs) -- the first issue from India’s international finance centre. The pullout, after the offering failing to get enough bids, may prompt prospective issuers to reconsider their listing plans in Gandhinagar, said lawyers and consultants.

XED cited investors’ inability to complete their applications due to KYC (Know Your Client)-related issues and subdued institutional participation as the reasons for the withdrawal.

“The withdrawal of the IPO from GIFT IFSC, after seeing limited investor interest, is more a reality check for how the platform can evolve,” said Suresh Swamy, Partner, Price Waterhouse & Co LLP, GIFT City. “It brings into focus a simple issue: listing today is being asked to succeed without the natural support of resident investors and domestic mutual funds.”

Both foreign and Indian companies can raise money via IPOs at GIFT City. Such issues must rely on foreign portfolio investors, NRIs and offshore funds, as retail investors have limited access, said lawyers.

The catch here is that all these investors, including FPIs, NRIs and offshore entities, must complete full KYC with an IFSC-registered broker, including identity, address, and source of funds verification. Entities need additional disclosures on beneficial ownership.

“The friction of onboarding requirements like PAN-linked KYC for non‑residents and lingering questions around tax treatment, and hesitation is understandable,” said Swamy.

Consultants and lawyers said tweaks in investor participation rules in the Gift City could help boost participation in IPOs there.

“Despite regulatory changes in 2025 and early 2026, structural issues persist,” said Abhinav Kumar, Partner–Capital Markets at TT&A. “One major hurdle is that Indian residents are not allowed to invest in IFSC IPOs. Because of this, intermediaries have to carry out extra checks to ensure no domestic money enters these issues, making the process longer and more complex than a regular IPO in India.”

According to Kumar, earlier, foreign investors needed either an embassy letter or proof from their government. Now, both are required, which has increased paperwork and delayed the process.

The absence of domestic investors has significantly reduced the pool of capital, making it harder for IPOs to succeed, said Gagan Anand, Managing Partner, Legacy Law Offices LLP.

GIFT City’s strength has emerged in in debt listings and cross-border financial services, but equity markets remain nascent.

While the Indian government has made strides in dismantling "double-regulatory" hurdles and streamlining approvals, the anticipated "euphoria" has been muted, said Kaushal Upadhyaya, Associate Partner, KPMG in India.