Indian Depository Receipt1

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RUPA SINGHRO LL NO - 12

Indian Depository Receipt



IDR: Introduction

y An IDR is an instrument denominated in Indian Rupeesin the form of a depository receipt created by a DomesticDepository (custodian of securities registered with the

Securities and Exchange Board of India) against theunderlying equity of issuing company to enable foreigncompanies to raise funds from the Indian securitiesMarkets.

y In simple terms, an IDR is a receipt, declaring ownershipof shares of a foreign company. These receipts can belisted in India and traded in Indian rupees.



P rincipal P articipants & their Roles

Issuer Company: The issuer company must be incorporated outside India and listed inthe country of its incorporation.

Domestic Depository: It will issue IDRs representing the underlying equity shares of the issuer company to investors in India. It must be an Indian entity appointed by theissuer company and registered as a custodian of securities with SEBI. It acts as a trusteeon behalf of the IDR holders and its rights and obligations will be as specified in theDeposit Agreement signed between the issuer company and the Domestic Depository.

Overseas Custodian: The issuer company issues equity shares to the OverseasCustodian who holds them on behalf of the Domestic Depository and on basis of whichthe Domestic Depository issues IDRs in India. It is a foreign entity appointed by theDomestic Depository.

The Registrar and Transfer Agent ("R&T Agent"): R&T Agent provides services tothe issuer company, the Domestic Depository and the IDR holders in India primarily being registration and transfer of IDRs in India. Examples of services include keepingrecords of the IDR holders, coordinating corporate actions and handling investorgrievances.



Eligibility criteria for foreign issuing company

y P re issue paid up capital and free reserves of at least US$ 50 millionand have a minimum average market capitalization (during the last3 years) in its parent country of at least US$ 100 million;

y A continuous trading record or history on a stock exchange in itsparent country for at least three immediately preceding years;

y A track record of distributable profits for at least three out of immediately preceding five years;

y Listed in its home country and not been prohibited to issuesecurities by any Regulatory Body and has a good track record withrespect to compliance with securities market regulations.

The size of an IDR issue shall not be less than Rs. 50 crores



IDR Issue P rocess

y IDRs will be issued to investors in India through a public issuein the same way as equity shares are issued in an I P O in India.

y

A Draft Red HerringP

rospectus ("DRHP

") would be prepared by the Company and the Book Running Lead Managers("BRLMs") which would be examined by SEBI. The same would be available on the websites of SEBI and the BRLMs.

y After clearance from SEBI, issue dates will be announced anda Red Herring P rospectus ("RH P ") will be submitted toRegistrar of Companies (RoC) and the same will be availableon the websites of SEBI, the BRLMs and the Stock Exchanges.



Cont..

y The price band will be announced prior to the issue openingdate and investors can apply for IDRs by completing anapplication form during the issue period as in the case of anIP O in India.

y There will be a book building process and the issue price will be finalized; once the issue price has been finalized, IDRs will be credited into the dematerialized accounts of the IDR

holders as for any I P O in India.

y Once the issuer company gets listing and trading approval, theIDRs will trade on the Stock Exchanges as in the case of anIP O in India.



Reservations in IDR issues

y At least 50% of the Issue is to be allocated toQualified Institutional Buyers(QIBs)

y 30% of the issue to the retail individual investors and balance 20% of the issue to non-institutionalinvestors and employees.



Minimum and maximum limits of bids

y Retail Investors: Minimum of Rs 20,000 and maximum of Rs 100,000.

y

NII: Non-institutional investors have to invest above Rs100,000 up to the issue size.

y QIBs: Institutional investors above Rs100,000 up to theissue size.

y No IDR holder can individually own more than 5% of thetotal IDRs issued except for QIBs which can hold up to 15%of the IDR issued.



Standard Chartered IDR

y 30th March, 2010 Standard Chartered P lc(`STANCHART¶) filed its draft Red Herring P rospectus with SEBI

y The Issue had a 2.01 times subscription level.

y Issue was made of 240m IDRs with denomination of 104INR, end use of the fund would be to support growth

across the business of the company internationally

y Trading for this IDR has been started from June 11, 2010.



Cont«

y For P articular this issue 1 IDR stands for 1/10th of share and any dividend given by the company will beapportioned according to the IDR holding

y The same is true for Rights Issue also.

y Voting rights will also work as per stocks, there is no

significance of 1/10th vote, if you have 10 IDRs it will be accounted for 1 vote and so on.



Fungibility

y DRs holders can convert IDRs into underlying equity shares only after one year and with the priorapproval of the RBI. Upon such conversion, resident

individual investors are allowed to hold theunderlying equity shares only for the purpose of sale within a period of 30 days from the said conversion.

y Conversion of equity shares into IDRs is notpermitted under current regulations i.e. reversefungibility is not allowed.



IDR ± Company benefits

Companies could have different objectives for listing inIndia like:

y

It provides enhanced local branding and target businessopportunities in India.

y It gives access to the large Indian capital pool and creates

avenues for future fund raising.

y It provides a currency for any acquisition in India whichotherwise would be possible only through cash.



Benefits for Investors

y An IDR is a mode for Indian investors to own aninterest in foreign companies, paid for in Indianrupees.

y IDRs allow an investor to have an exposure tooverseas companies in the same manner you investin Indian companies.

y The US$200,000 limit is not applicable for aninvestment in IDRs.



Conclusion

IDRs are a significant step towards the globalization of theIndian security markets which would also be a potential

benefit for the domestic investors in India. There remainsome challenges. However, if the Standard Chartered IDR is successful, it may herald a new trend of internationalcompanies listing IDRs in India. In the future, India may become a source for capital for international issuers.



Thank You!!

Indian Depository Receipt1

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