IDR holders also eligible for rights issue: StanChart

UK-based Standard Chartered, the first foreign entity to be listed in the country, today said its Indian Depository Receipt (IDR) holders are eligible to participate in the bank's forthcoming $5.3 billion rights issue.

"Even though holders of IDRs are not able to take up new shares under the rights issue, they do have an entitlement to new shares under the rights issue on the basis of IDRs held on October 25, 2010," Standard Chartered said in a filing to the Bombay Stock Exchange.

The record date of October 25 will be used to determine entitlement under the rights issue, in accordance with Indian rules, it said.

 

"IDR holders together have an entitlement to 30,00,000 new Standard Chartered shares," it said, adding that the entitlement of IDRs holders will be based on the total amount received from the sale of all the rights.

These sale proceeds will be received in pounds sterling. As mandated by the terms and conditions of the IDRs, the bank will convert these proceeds into Indian rupees.

The bank proposes to effect this conversion after deduction of exchange fees and on the basis of the pound sterling-Indian rupee rate of exchange as derived from the Reserve Bank of India website at the close of business in India on each day notified for the sale of rights, it said.

Once all the rights have been sold, the total net proceeds converted into Indian rupees will be distributed on a pro rata basis to eligible IDR holders within 15 business days, it added.

However, it also said the IDR holders would not be able to participate in the normal rights issue process owing to regulatory issues.

"In the prospectus issued in May this year for the IDR offering, the company disclosed that there were certain limitations on the ability of the company to make a rights issue available to holders of IDRs because of the potential application of certain provisions of Indian law, compliance with which would not be possible within the timeframe applicable to a UK rights issue," it said.

With regard to the timeframe, the bank's filing to the Bombay Stock Exchange said that making a rights issue available to IDRs holders could have timetable implications that could not be satisfactorily resolved, making it difficult for the bank to undertake a rights issue simultaneously in the UK and in India.

The rights issue announced by the bank last week has an offer period of 10 business days, shorter than the offer period currently applicable to an ordinary Indian rights offering, it said.