IDR may offer 5% discount to retail investors; price likely around Rs 110.
Standard Chartered Plc intends to raise up to $750 million through the first-ever issue of Indian depository receipts (IDRs) that will open for bidding on May 25. While the price band has not been decided yet, retail investors may be offered a discount of 5 per cent to the issue price. The issue, comprising 240 million depository receipts, will close on May 28.
Earlier, it was expected that the size of the issue would be $1 billion. The bank did not specify why it had pruned the size of the prospective issue to $500-750 million.
This is the first IDR issue after the Securities and Exchange Board of India framed the rules more than three years ago. IDRs would allow Indian investors to own shares of the international bank, which is listed in London and Hong Kong. According to the red herring prospectus of the issue, every 10 IDRs would represent one share of Standard Chartered Plc.
Standard Chartered Plc group Chief Executive Peter Sands said listing the bank in an “important market” like India was a “strategic move”.
“Listing in India is a strategic move that will reinforce Standard Chartered’s market visibility, brand presence and help drive growth of its business here,” said Sands. “We are looking at raising $500-750 million,” he added.
India accounted for 12 per cent of the bank’s income in 2009. It contributed $1.06 billion to the bank’s $7.23-billion operating profit last year, next only to Hong Kong.
Meanwhile, the price band will be decided on May 24, based on the closing price of the stock on the London Stock Exchange (LSE). “We will refer to the London price to decide the issue price,” said Richard Meddings, finance director, Standard Chartered Plc.
Incidentally, the bank’s shares on LSE are trading at £16.90 (Rs 1,120). Since 10 IDRs will represent one share, it is expected that each IDR will be priced around Rs 110.
An important aspect is that insurance companies will not be able to participate in the issue. The Insurance Regulatory and Development Authority has barred insurance companies from investing in IDRs, saying the Insurance Act forbids investments outside the country.
Investment bankers managing the issue said the bank would also consider participation of anchor investors. “The book for anchor investors, if any, will open on May 24, a day prior to the opening of the issue,” said Nimesh Kampani of JM Financial. The discount for retail investors will be decided before the opening of the issue. “We may offer a discount of 5 per cent...we have not decided yet,” said Sands.
Sanda added the bank was open to listing in other markets, including China. “We remain open to potential listings in other markets, but it’s not something we’d rush to do. At the right moment and once regulatory clearances are in place, we will look at listing in Shanghai,” he said.