Sebi issues disclosure norms for IDR rights offering

Market regulator the Securities and Exchange Board of India (Sebi) today said companies offering IDRs through rights issue have to file offer document as per the prevailing norms in the country.

Through a notification, Sebi today amended the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, by adding a chapter relating to rights issue of Indian Depository Receipts (IDRs).

"Every listed issuer offering IDRs through a rights issue shall prepare offer documents in accordance with the home country requirements," the Sebi said in a circular.

IDRs are the instruments through which a foreign company raises capital in the country by offering underlying shares to domestic investors.

So far Standard Chartered is the only foreign company which has come out with a IDR issue and the Sebi circular would provide them with guidelines for coming out with a rights offer.

Through a rights issue, a company raises funds by allotting shares to its existing shareholders.

The Sebi further said that if the issuing company was in breach of the IDR listing agreement then it cannot come out with a rights offering.

The issuing company would have to inform the stock exchange where its existing IDR is already listed, about the rights issue. Further, the IDRs issued by way of rights issue would have to be listed on one of those stock exchanges in the country.

On fast track issue, the regulator said if the issuer had no disagreement with the stock exchange on the provisions of deposit agreements and listing agreements for at least three years, without any pending show-cause notices or prosecution proceedings, the issuer can get approval for the same.