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India Inc raising offshore funds onshore at GIFT City

Indian companies with a global footprint have raised $37 billion in the past 14 months from the GIFT City, underscoring the role of the financial hub in bringing home much of the business previously done exclusively overseas.

At least 15 large companies including Mahindra & Mahindra, Reliance Industries, L&T, Tata Steel, the Adani group and HCL Technology have transacted in this Special Economic Zone.

Corporates are engaged in different kinds of funding including external commercial borrowing, foreign currency term loans and trade finance among others, taking total transaction value to $67 billion. More than half of it came in the past 14 months, according to the latest available data from IFSC, which is increasingly becoming a one-stop shop for local companies cutting global deals.

“During the pandemic, we have seen a significant surge in business volumes,” said Dipesh Shah, head – development at IFSC, the regulator for Gujarat GIFT City. “Large conglomerates have used IFSC platforms raising finances, which otherwise would have gone to other global centres like Singapore or London.”

Other companies transacting here include Hindalco Corporation, Hero Group, Coal India, Motherson Sumi, Apollo Tyres. All companies could not be contacted immediately for comments.

“M&M has leveraged the potential offered by the International Financial Services Centre at Gujarat GIFT City facility, for a couple of smaller transactions,” said a company spokesperson from Mahindra and Mahindra.

“This facility in a way benefits the Indian banks to extend their offerings in jurisdictions outside of India,” the person said.

As many as 16 banks, including Standard Chartered, State Bank of India, Bank of Baroda, Axis Bank, Kotak Mahindra Bank, Barclays, HDFC Bank, ICICI Bank and IndusInd, have helped make those transactions.

To facilitate funds in IFSC, the regulatory authorities have enabled a two-point provision. For Funds registered outside India and relocating to IFSC, the continuing interest requirement by the manager or sponsor has been made voluntary.

An Alternative Investment Fund (AIF) in IFSC is now permitted to invest in units of schemes launched by mutual funds regulated in FATF (Financial Action Task Force) compliant jurisdictions, including India.

India is expected to adopt Singapore’s Variable Capital Company model for investment funds at the IFSC with a separate legislation that is not part of the Companies Act.

An IFSC appointed-committee headed by Dr KP Krishnan submitted a report on the feasibility of a VCC structure at IFSC last week after evaluating structures in jurisdictions such as the UK, Singapore, Ireland and Luxembourg.

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