StanChart IDRs hit lifetime low on Sebi norm

The Indian Depository Receipts (IDRs) of Standard Chartered Plc fell sharply by over 17% on the the Bombay Stock Exchange (BSE) to hit an all-time low on the bourses today after market regulator Sebi said it will not be required to convert its IDRs into shares.

The IDR tumbled by 17.53% to settle at Rs 94.55 on the BSE, thus slipping below Rs 100-mark for the first time after it was listed on June 11, 2010.

In intra-day, it plunged by 19.97% to hit a lifetime low of Rs 91.75.

On the National Stock Exchange (NSE), the IDR ended at Rs 97, down 15.54%.

The steep fall came in the wake of Sebi saying that Standard Chartered need not convert the IDRs into the underlying shares, since there was enough liquidity in the IDRs.

"At the time of IPO, several HNIs and institutions have purchased StanChart IDRs in the hope that they will get an opportunity to convert into StanChart shares. However, with this regulation, it is clear that such conversion is not possible. Hence, the IDR holders will remain to be IDR holders. They will not be entitled to voting rights," SMC Global Securities said in a note.

Commenting on the stock fall, it noted that such a steep fall may be a knee-jerk reaction and the IDR can recover a bit.

"Considering these set of guidelines of convertibility the global companies may shy away from issuing IDRs in India. If that is the case, StanChart IDR issue may be the first as well as the last IDR issue from India," SMC Global Strategist & Head of Research Jagannadham Thunuguntla said.

After the completion of one year from the date of issuance of IDRs, redemption of the IDRs shall be permitted only if the IDRs are infrequently traded on the stock exchange(s) in India, the regulator said.

An IDR represents ownership in shares of a foreign firm, which trades in domestic capital market. An IDR is bought and sold just like a regular stock.

The British lending major came out with Indian maiden IDR issue in May, 2010 through which it had raised Rs 2,500 crore on high demand from institutional investors. Following that, on June 11, 2010, the IDRs got listed on the BSE and NSE.

StanChart is the only foreign company to have issued IDRs to the Indian shareholders. 10 StanChart IDRs represent one underlying equity of the UK-listed bank. The StanChart IDRs were due to come up for redemption on June 11, 2011.