Budget 2012: Standard Chartered rises to 20% on IDR fungibility announcement

MUMBAI: Standard Chartered, the lone India listed foreign bank, rose to 20% limit and could gain more after the Finance Minster Pranab Mukherjee allowed two-way fungibility of Indian Depositary Receipts.

The minister’s move could lead to many other international companies listing their shares in India that could lead to seamless movement of capital between their home country and India.

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Its shares were 20% higher at Rs94.20 with only buyers.

The move allows investors to buy Indian listed shares and sell them in the London market and vice versa. This improves liquidity. The stock had tanked when at the end of one year of listing Securities & Exchange Board of India declined to permit two-way fungibility citing abundant liquidity.

Standard Chartered had raised Rs 2,486 crore in its IDR offering in June 2010. No other foreign entity has since then entered the market in the absence of two-way fungibility.

An IDR is a rupee-denominated instrument, like an equity share, in the form of a depository receipt created by a domestic depository against the underlying equity of issuing company. It enables foreign firms to raise funds from the Indian capital market.

Any foreign firm with an existing business in India can float IDRs if it has a pre-issue paid-up capital and free reserves of at least $50 million and its parent company has at least $100 million average market capitalization during the last three years.