In a move to kick start the much-anticipated Indian Depository Receipts (IDR) norms, the Securities and Exchange Board of India (Sebi) today amended rules to allow such offerings to all category of investors including the Indian retail investors.
Sebi also reduced the minimum application value in IDR from the existing Rs 200,000 to Rs 20,000 – again to lure retail investors into the new instruments, which are expected to be issued by high quality global corporations having significant presence in India.
Though rules for IDRs have been in existence for some time now (which are now being liberalised), no company, as yet, has gone for this route.
Fifty percent of IDRs, however, should be subscribed by Qualified Institutional Buyers (QIBs), according to Sebi.
Under the earlier rules, retail investors were barred from subscribing to IDRs, which are meant for foreign companies to go for a listing on Indian stock exchanges by selling shares in India – just like Indian companies mobilize funds via ADRs (American Depository Receipts) for listing in the New York Stock Exchange and NASDAQ; and GDRs (Global Depository Receipts) for London and Singapore listings.
In a press note, the capital market regulator said: “Guidelines have been amended to enable all categories of investors to apply for IDR issues subject to at least 50% of the issue being subscribed by QIBs. The minimum application value in IDR issues has been reduced to Rs 20,000 from Rs 200,000.”
Investment bankers expect the relaxation in the rules will encourage MNCs operating in India to go for a “dual-listing” – meaning companies which are listed only on NYSE, or NASDAQ, or other stock exchanges outside India to list on Bombay and National stock exchanges.
Earlier on July 18 this year, the ministry of corporate affairs had issued a liberalised dividend and profitability track record for IDR issuers.
Under the new rules, foreign companies should have a three-year trading track record in a stock exchange.
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