Local issue may be must with ADR/GDRs
Corporate houses planning to raise capital abroad through ADR or GDR issues may soon have to offer in the Indian market a third of the incremental equity which they propose to issue overseas.
By Geerish Chandra Prasad & G Ganapati Subramaniam, ET Bureau |
NEW DELHI: Corporate houses planning to raise capital abroad through ADR or GDR issues may soon have to offer in the Indian market a third of the incremental equity which they propose to issue overseas. The idea is to allow local investors more opportunity to participate in the Indian issuer���s fortunes by way of an extra slice in its equity.
The finance ministry has asked the capital market regulator SEBI to amend the scheme in this regard, it is understood. The proposed change is based on a recommendation from the high-powered committee headed by the Prime Minister���s economic advisory council member Saumitra Chaudhuri that submitted its report to the government earlier this year.
Accordingly, the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme (1993) is set to be amended. The move comes in the backdrop of the government���s proposal to ensure that public float of a listed company does not go below a prescribed threshold. The finance ministry is expected to decide whether this should be 25% as originally proposed earlier this year.
Another amendment proposed in the scheme is to extend the time lag between a domestic issue and an overseas one to one year from the present six months (if it is not a simultaneous issue of IPO and ADR/GDR). The capital market regulator and the finance ministry would also evolve a set of guidelines to assist issuing companies to identify
overseas exchanges of comparable regulatory and other risks.
The finance ministry had recently liberalised the pricing norms for ADRs and GDRs to address the concerns of issuers that the pricing based on six month average closing price was not favourable in a falling market. The ministry shortened this requirement to two months��� average closing price.
The finance ministry has asked the capital market regulator SEBI to amend the scheme in this regard, it is understood. The proposed change is based on a recommendation from the high-powered committee headed by the Prime Minister���s economic advisory council member Saumitra Chaudhuri that submitted its report to the government earlier this year.
Accordingly, the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme (1993) is set to be amended. The move comes in the backdrop of the government���s proposal to ensure that public float of a listed company does not go below a prescribed threshold. The finance ministry is expected to decide whether this should be 25% as originally proposed earlier this year.
Another amendment proposed in the scheme is to extend the time lag between a domestic issue and an overseas one to one year from the present six months (if it is not a simultaneous issue of IPO and ADR/GDR). The capital market regulator and the finance ministry would also evolve a set of guidelines to assist issuing companies to identify
overseas exchanges of comparable regulatory and other risks.
The finance ministry had recently liberalised the pricing norms for ADRs and GDRs to address the concerns of issuers that the pricing based on six month average closing price was not favourable in a falling market. The ministry shortened this requirement to two months��� average closing price.
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The capital market regulator is also in the process of implementing the important proposal of the panel on domestic convertible bonds. Once this is in place, banks and corporate houses will be able to trade in the equity component carved out of convertible bonds, a hybrid instrument of debt and equity.Download
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