Posts Tagged ‘Indian Depository Receipts’

Allot IDRs on proportionate basis: SEBI

Allot IDRs on proportionate basis: SEBI

Market regulator SEBI today said that the allotment of Indian Depository Receipts, a tool used by foreign companies to raise funds from Indian bourses, should be made on proportionate basis and not at the discretion of the issuer.


“Allotment to all these categories shall be made on proportionate basis only,” SEBI said, amending its guidelines concerning general and disclosure requirements pertaining to IDR issues.

The market regulator further said that in case of underwritten issues, if the issuing company does not receive the minimum subscription of 90 per cent of the net offer, from the date of closure of the issue, the issuing company shall forthwith refund the entire subscription amount received.


Underwriting refers to the process that a large financial service provider like a bank or investment house undertakes to assess the eligibility of a customer to receive their financial products and in case the product is not bought, the financial service provider takes them.

Commenting on it, SMC Capitals Equity Head Jagannadham Thunuguntla said, “It is a right step for creating a good IDR market in India. It will help in smooth execution of IDRs.”


SEBI further said that the audited financial statements should be prepared in accordance with Indian GAAP, or with the International Financial Reporting Standards (IFRS) or US GAAP, for a period of three financial years immediately preceding the date of prospectus.

The report prepared by the statutory auditors of the issuing company should disclose financial statements in Indian rupees, while the issuing company would do it in Sterling Pound, Euro, Yen or US Dollar. 🙂

IDR norms by RBI to allow only serious investors: Analysts

RBI’s recent direction to have a lock-in period of one year for investors to redeem their investment in Indian Depository Receipts is aimed at attracting long-term players to these instruments, say analysts.

Also, the central bank’s rule that proceeds from IDR issues have to be immediately repatriated from India is designed to prevent companies from misusing foreign exchange market, they said.

Yesterday, RBI allowed overseas companies to raise money through issuing rupee-denominated IDRs in Indian markets and framed rules in this regard.

The central bank had said the proceeds from the issue of IDRs will have to be immediately repatriated outside India by the companies issuing such IDRs.

It had also said IDRs will not be redeemable into underlying equity shares before the expiry of one year period from the date of issue of the IDRs.

“It is a safeguard by the RBI to prevent non-serious investors from investing into such IDRs and also to prevent foreign companies to misuse the IDRs for managing foreign exchange,” Jagannadham Thunuguntla, equity head of SMC Capitals said.

As per the norms, FEMA Regulations will not apply to persons resident in India for investing in IDRs and subsequent transfer arising out of transaction on a recognised stock exchange.

Further, other persons resident in India will be allowed to hold the underlying shares only for the purpose of sale within 30 days from the date of conversion of IDRs.

The financial/banking companies having presence in India, either through a branch or subsidiary, have to get permission of the sectoral regulator like RBI or IRDA before issuing IDRs.

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