First Share-Gdr Conversion

A shareholder of India Cements Limited (ICL) today tested the liberalised two-way fungibility norms announced in February 2001 when he converted domestic shares into Global Depository Receipts (GDR) listed on the Luxembourg Stock Exchange.

The company said it would know of the details of the transaction only tomorrow (after the European markets close), S Balakrishnan, the ICL company secretary said.

ICL had, prior to this transaction, 0.28 per cent of its total equity in the form of GDRs. India Cements closed at Rs 23.65, up 1.50 per cent over Monday's close on the Bombay Stock Exchange.

DSP Merrill Lynch facilitated the trade transaction as brokers while Citibank was the local-cum-global depository of India Cements Limited.

This is the first stock trade to benefit from the two-way fungibility guidelines that were announced in the Union Budget of 2001.

Commenting on this first transaction, Shitin Desai, vice chairman and managing director, DSP Merrill Lynch Limited, said, "This is yet another step in India's movement towards achieving global standards in financial practices and we are very happy to have facilitated the first ever transaction in India."

The long awaited two-way fungibility will help in developing two-way business and should also step up interest among international investors.

Additionally, along with foreign institutional investors, this mechanism will enable non resident Indians to access the local bourses.

A direct fall out of the two-way fungibility process is that it will limit the arbitrage difference that prevails in share prices of companies that are listed on the international as well as Indian bourses.

The two-way fungibility guidelines of the Reserve Bank of India issued in February 2002 enable a non-resident investor to buy local shares of an Indian company through an Indian stock broker and convert them into ADRs/GDRs that are eligible to be traded on the international stock exchanges.