Standard Chartered Bank (Stanchart) of the UK is in line to become the first issuer of Indian Depository Receipts (IDRs) after it obtained a green signal for its fund raising from the Reserve Bank of India (RBI).
Stanchart will now file a prospectus with the Securities and Exchange Board of India (SEBI) and is on course to be the first foreign entity to be listed on Indian Stock Exchanges. Details of its fund raising plans are not known. However, reports have suggested that it may be seeking to raise Rs5000 crore from the Indian market.
Interestingly, this development has happened just after its talks to acquire the retail assets of ABN Amro Bank have reportedly collapsed over the valuation of assets. Stanchart’s listing on Indian exchanges will also be an important milestone because IDRs as a concept have not caught on for almost a decade after it was first proposed in 2000 and nearly six years after the rules for their issue were first framed. These rules have since been tweaked several times in 2009 and diluted until we are now on the verge of seeing the first IDR listing.
In June this year, SEBI permitted mutual funds to invest in IDRs; it also changed listing rules allowing them to follow corporate governance norms as applicable in their home country. In July it tweaked disclosure norms and more recently it introduced the concept of ‘anchor investor’ for IDRs as well; this means that qualified institutional buyers (QIB) can be allotted up to 30% of the issue reserved for the category, even prior to issue opening with a 30-day lock-in rule. It also reserved 30% of the issue for retail investors.
However some concerns over the tax treatment of IDRs remain and media reports suggest that some potential issuers are also worried about our tough delisting rules even before these instruments are listed.
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