Indian Depository Receipt and Its
Procedure
Meaning
An Indian Depository
Receipt (IDR) is a financial instrument denominated in Indian Rupees in the
form of a depository receipt created by a Domestic Depository
(custodian of securities registered with the Securities and Exchange Board of
India) against the underlying
equity of issuing company to enable foreign companies to raise funds from the
Indian securities Markets.
(In layman language; it’s a way
of subscribing of foreign security by Indians entity or individuals)
Conditions to be
complied with
1. Its pre-issue paid-up capital and free
reserves are at least US$ 50 million and;
2.
Minimum
average market capitalization during the last three years in its parent country
of at least US$ 100 million;
3. Continuously trading on a stock exchange in
its parent or home country (the country of incorporation of such company) for
at least three immediately preceding years;
4. Track
record of distributable profits for at least three out of immediately preceding
five years;
5. It fulfils such other eligibility criteria as
may be laid down by the Securities and Exchange Board of India from time to
time in this behalf.
Procedure
to be followed for issue of IDRs
Issuing
company shall follow the following procedure for making an issue of IDRs:
Issuing
company shall, obtain the necessary approvals or exemptions from the appropriate
authorities from its incorporating Country.
Prior
written approval from the Securities and Exchange Board of India on an
application made in this behalf for issue of IDRs along with the issue size.
An
application shall be made to the SEBI along with draft prospectus at least
ninety days prior to the opening date of the IDRs issue.
Issuing
Company shall file a Due Diligence Report to SEBI through a Merchant Banker.
The
Securities and Exchange Board of India may, within a period of thirty days of
receipt of an application, call for such further information, and explanations,
as it may deem necessary, for disposal of such application and shall dispose
the application within a period of thirty days of receipt of further
information or explanation.
If
within a period of sixty days from the date of submission of application or
draft prospectus, the Securities and Exchange Board of India specifies any
changes to be made in the draft prospectus, the prospectus shall not be filed
with the Securities and Exchange Board of India or Registrar of Companies
unless such changes have been incorporated therein.
The
issuing company shall on approval being granted by the Securities and Exchange
Board of India to an application, pay to the Securities and Exchange Board of
India an issue fee as may be prescribed from time to time by the Securities and
Exchange Board of India.
The
issuing company shall file a prospectus, to the SEBI and ROC, New Delhi before
such issue,
(Certified by two authorized signatories of
the issuing company, one of whom shall be a whole-time director and other the
Chief Financial Officer stating the particulars of the resolution of the Board
by which it was approved)
The
prospectus to be filed with the Securities and Exchange Board of India and the
Registrar of Companies, New Delhi shall contain the prescribed particulars and
shall be signed by all the whole-time directors of the issuing company, and the
Chief Financial Officer.
Issuing
company shall appoint
An
overseas custodian bank,
A
Domestic Depository and a Merchant Banker for the purpose of issue of IDRs.
Issuing
company may appoint underwriters registered with the Securities and Exchange
Board of India to underwrite the issue of IDRs.
Issuing
company shall deliver the underlying equity shares or cause them to be
delivered to an Overseas Custodian Bank and the said bank shall authorize the
domestic depository to issue IDRs.
Issuing
company shall obtain in-principle listing permission from one or more stock
exchanges having nationwide trading terminals in India.
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General
information
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Name and
address of the registered office of the company;
Name and
address of the Domestic Depository, the Overseas Custodian Bank with the
address of its office in India, the Merchant Banker, the underwriter to the
issue and any other intermediary which may be appointed;
Names and
addresses of Stock Exchanges where applications are made or proposed to be
made for listing of the IDRs;
Names and
addresses of Stock Exchanges where applications are made or proposed to be
made for listing of the IDRs;
Provisions
relating to punishment for fictitious applications;
Statement
or declaration for refund of excess subscription;
Declaration
about issue of allotment letters or certificates or IDRs within the
stipulated period;
a.
Date of
opening of issue
b.
Date of
Closing of Issue
Declaration
by the Merchant Banker with regard to adequacy of resources of underwriters
to discharge their respective obligations, in case of being required to do
so;
Statement
by the Issuing company that all moneys received out of issue of IDRs shall be
transferred to a separate domestic bank account, name and address of the bank
and the nature and number of the account to which the amount shall be
credited;
The
details of proposed utilization of the proceeds of the IDR issue.
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Capital
Structure of the Company
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Authorized,
Issued
Subscribed
and paid-up capital of issuing company
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Terms of
the issue
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Rights of
the IDR holders against the underlying securities;
Details of
availability of prospectus and forms, i.e.,
date, time, place etc.;
Amount and
mode of payment seeking issue of IDRs; and
Special
tax benefits for the Issuing company and holders of IDRs in India.
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Particulars
of Issue
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The
objects of the issue;
The
cost of the Project, if any; and
The means
of financing the projects, if any including contribution by promoters
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Company,
Management and Project
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Main
objects, history and present business of the company;
Promoters
or Promoter group and their background.
If
there are no identifiable promoters, the names, addresses and other
particulars as may be specified by the Securities and Exchange Board of India
of all the persons who hold
5%
or more equity share capital of the company shall be disclosed;
The
subsidiaries of the company, if any;
The
particulars of the Management or Board ;
The
location of the project, if any;
The
details of plant and machinery, infrastructure facilities, technology etc.,
where applicable;
Schedule
of implementation of project and progress made so far, if applicable;
Nature
of product(s), consumer(s), industrial users;
The
particulars of legal, financial and other defaults, if any;
Risk
factors to the issue as perceived; and
Consent
of the Merchant Bankers, Overseas Custodian Bank, the Domestic Depository and
all other intermediaries associated with the issue of IDRs.
The
information, as may be specified by the Securities and Exchange Board of
India, in respect of listing, trading record or history of the Issuing
company on all the stock exchanges, whether situated in its parent country or
elsewhere.
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Report
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A report
by the statutory auditor of the Issuing company, in such form as may be
specified by the Securities and Exchange Board of India
Audited
financial statements of the Issuing company in respect of three financial
years immediately preceding the date of prospectus;
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Other
Information
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The
Minimum subscription for the issue;
The
fees and expenses payable to the intermediaries involved in the issue of
IDRs;
The
declaration with regard to compliance with the Foreign Exchange Management
Act, 1999
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Inspection
of Documents
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The Place
at which inspection of the offer documents, the financial statements and
auditor's report thereof shall be allowed during the normal business hours;
and
any other
information as specified by the Securities and Exchange Board of India or the
Income-tax Authorities or the Reserve Bank of India or other regulatory
authorities from time to time.
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