adr, gdr & idr anshul chaddha nilesh jain (26) fazeel kazi (29) prashant kokare (31) ajay patel...

55
ADR, GDR & IDR Anshul Chaddha Nilesh Jain (26) Fazeel Kazi (29) Prashant Kokare (31) Ajay Patel Milind Walke Vivek Dubey

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ADR GDR amp IDRAnshul Chaddha

Nilesh Jain (26)

Fazeel Kazi (29)

Prashant Kokare (31)

Ajay Patel

Milind Walke

Vivek Dubey

India is hot these days ndash all major brokerages are of the opinion that India has a great long term potential and that investors in India would reap handsome benefits in the next 10 years

With the current correction in the Indian stock market the valuations have become even better And the logic of investing in Indian equity market has become even more compelling

This is great for people living in India But what about Non Resident Indians (NRIs) and

foreign nationals Considering the many restrictions on NRIs and foreign nationals investing in India how can they benefit from the potential that India offers

There are some very good proxies to investing directly in India ndash and ADRs and GDRs are a great option

ADR stands for American Depository Receipt Similarly GDR stands for Global Depository Receipt Letrsquos understand these better

Every publicly traded company issues shares

These shares are sometimes also listed and traded on foreign stock exchanges

But to list on a foreign stock exchange the company has to comply with the policies of those stock exchanges

But many good companies get listed on these stock exchanges indirectly ndash using ADRs and GDRs

Depositary ReceiptGlobal Depository Receipt (GDR)American Deposit Receipt (ADR)

Foreign Currency Convertible Bond (FCCB)

Euro Medium Term Notes Program

A depository is like a bank wherein the deposits are securities (viz shares debentures bonds government securities units etc) in electronic form at the request of the shareholder through the medium of a Depository Participant

If an investor wants to utilize the services offered by a Depository the investor has to open an account with the Depository through a Depository Participant

A Depositary Receipt is a negotiable security that represents an

ownership interest in securities of a foreign issuer typically trading outside

its home market

Depositary Receipts are created when a broker purchases a foreign

companys shares on its home stock market and delivers the shares to the

depositarys local custodian bank and then instructs the depositary

bank to issue Depositary Receipts

In addition Depositary Receipts may also be purchased in the secondary

trading market

They may trade freely just like any other security either on an exchange

or in the over-the-counter market and can be used to raise capital

ADRs were the first type of depositary receipt to evolve They were

introduced in 1927 in response to a law passed in Britain which

prohibited British companies from registering shares overseas without a

British-based transfer agent

ADR- American Depositary Receipts A negotiable certificate issued by a US bank Represents a specified number of shares of a foreign

company ADRs are denominated in US dollars Give Non-US companies access to the US capital

markets

GDR- Global Depositary Receipts A bank certificate issued in more than one country for

shares in a foreign company Offered for sale globally through the various bank

branches Shares trade as domestic shares Provide exposure to the global markets (except US)

outside the issuerrsquos home market

Let us take Patni example ndash trades on the Indian stock at around Rs460-

This is equivalent to US$ 10 ndash assume for simplicity Now a US bank purchases 10000 shares of Patni and issues

them in US in the ratio of 101 This means 1 ADR purchased is worth 10 Patni shares Quick calculation means 1 ADR = US $100 Once ADR are priced and sold its subsequent price is

determined by supply and demand factors like any ordinary shares

COMPANY SHARE

DEPOSITARY BANK

INVESTOR

DR Issuance ProcessDR Issuance Process

US Broker

Depository(JP Morgan NY)

India Broker

Local Custodian(JP Morgan Mumbai)

US Investor

17

2

3

4

5

6 SENSEX

Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins

To issue new DRs the broker contacts a local broker in the issuerrsquos home market

The local broker purchases ordinary shares on an exchange in the local market

Ordinary shares are deposited with a local custodian

The local custodian instructs the depositary to issue DRs that represent the shares received

The depositary issues DRs and delivers them in physical form or book entry form

The broker delivers DRs to the investor or credits the investorrsquos account

1

2

3

4

5

6

7

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

India is hot these days ndash all major brokerages are of the opinion that India has a great long term potential and that investors in India would reap handsome benefits in the next 10 years

With the current correction in the Indian stock market the valuations have become even better And the logic of investing in Indian equity market has become even more compelling

This is great for people living in India But what about Non Resident Indians (NRIs) and

foreign nationals Considering the many restrictions on NRIs and foreign nationals investing in India how can they benefit from the potential that India offers

There are some very good proxies to investing directly in India ndash and ADRs and GDRs are a great option

ADR stands for American Depository Receipt Similarly GDR stands for Global Depository Receipt Letrsquos understand these better

Every publicly traded company issues shares

These shares are sometimes also listed and traded on foreign stock exchanges

But to list on a foreign stock exchange the company has to comply with the policies of those stock exchanges

But many good companies get listed on these stock exchanges indirectly ndash using ADRs and GDRs

Depositary ReceiptGlobal Depository Receipt (GDR)American Deposit Receipt (ADR)

Foreign Currency Convertible Bond (FCCB)

Euro Medium Term Notes Program

A depository is like a bank wherein the deposits are securities (viz shares debentures bonds government securities units etc) in electronic form at the request of the shareholder through the medium of a Depository Participant

If an investor wants to utilize the services offered by a Depository the investor has to open an account with the Depository through a Depository Participant

A Depositary Receipt is a negotiable security that represents an

ownership interest in securities of a foreign issuer typically trading outside

its home market

Depositary Receipts are created when a broker purchases a foreign

companys shares on its home stock market and delivers the shares to the

depositarys local custodian bank and then instructs the depositary

bank to issue Depositary Receipts

In addition Depositary Receipts may also be purchased in the secondary

trading market

They may trade freely just like any other security either on an exchange

or in the over-the-counter market and can be used to raise capital

ADRs were the first type of depositary receipt to evolve They were

introduced in 1927 in response to a law passed in Britain which

prohibited British companies from registering shares overseas without a

British-based transfer agent

ADR- American Depositary Receipts A negotiable certificate issued by a US bank Represents a specified number of shares of a foreign

company ADRs are denominated in US dollars Give Non-US companies access to the US capital

markets

GDR- Global Depositary Receipts A bank certificate issued in more than one country for

shares in a foreign company Offered for sale globally through the various bank

branches Shares trade as domestic shares Provide exposure to the global markets (except US)

outside the issuerrsquos home market

Let us take Patni example ndash trades on the Indian stock at around Rs460-

This is equivalent to US$ 10 ndash assume for simplicity Now a US bank purchases 10000 shares of Patni and issues

them in US in the ratio of 101 This means 1 ADR purchased is worth 10 Patni shares Quick calculation means 1 ADR = US $100 Once ADR are priced and sold its subsequent price is

determined by supply and demand factors like any ordinary shares

COMPANY SHARE

DEPOSITARY BANK

INVESTOR

DR Issuance ProcessDR Issuance Process

US Broker

Depository(JP Morgan NY)

India Broker

Local Custodian(JP Morgan Mumbai)

US Investor

17

2

3

4

5

6 SENSEX

Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins

To issue new DRs the broker contacts a local broker in the issuerrsquos home market

The local broker purchases ordinary shares on an exchange in the local market

Ordinary shares are deposited with a local custodian

The local custodian instructs the depositary to issue DRs that represent the shares received

The depositary issues DRs and delivers them in physical form or book entry form

The broker delivers DRs to the investor or credits the investorrsquos account

1

2

3

4

5

6

7

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

ADR stands for American Depository Receipt Similarly GDR stands for Global Depository Receipt Letrsquos understand these better

Every publicly traded company issues shares

These shares are sometimes also listed and traded on foreign stock exchanges

But to list on a foreign stock exchange the company has to comply with the policies of those stock exchanges

But many good companies get listed on these stock exchanges indirectly ndash using ADRs and GDRs

Depositary ReceiptGlobal Depository Receipt (GDR)American Deposit Receipt (ADR)

Foreign Currency Convertible Bond (FCCB)

Euro Medium Term Notes Program

A depository is like a bank wherein the deposits are securities (viz shares debentures bonds government securities units etc) in electronic form at the request of the shareholder through the medium of a Depository Participant

If an investor wants to utilize the services offered by a Depository the investor has to open an account with the Depository through a Depository Participant

A Depositary Receipt is a negotiable security that represents an

ownership interest in securities of a foreign issuer typically trading outside

its home market

Depositary Receipts are created when a broker purchases a foreign

companys shares on its home stock market and delivers the shares to the

depositarys local custodian bank and then instructs the depositary

bank to issue Depositary Receipts

In addition Depositary Receipts may also be purchased in the secondary

trading market

They may trade freely just like any other security either on an exchange

or in the over-the-counter market and can be used to raise capital

ADRs were the first type of depositary receipt to evolve They were

introduced in 1927 in response to a law passed in Britain which

prohibited British companies from registering shares overseas without a

British-based transfer agent

ADR- American Depositary Receipts A negotiable certificate issued by a US bank Represents a specified number of shares of a foreign

company ADRs are denominated in US dollars Give Non-US companies access to the US capital

markets

GDR- Global Depositary Receipts A bank certificate issued in more than one country for

shares in a foreign company Offered for sale globally through the various bank

branches Shares trade as domestic shares Provide exposure to the global markets (except US)

outside the issuerrsquos home market

Let us take Patni example ndash trades on the Indian stock at around Rs460-

This is equivalent to US$ 10 ndash assume for simplicity Now a US bank purchases 10000 shares of Patni and issues

them in US in the ratio of 101 This means 1 ADR purchased is worth 10 Patni shares Quick calculation means 1 ADR = US $100 Once ADR are priced and sold its subsequent price is

determined by supply and demand factors like any ordinary shares

COMPANY SHARE

DEPOSITARY BANK

INVESTOR

DR Issuance ProcessDR Issuance Process

US Broker

Depository(JP Morgan NY)

India Broker

Local Custodian(JP Morgan Mumbai)

US Investor

17

2

3

4

5

6 SENSEX

Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins

To issue new DRs the broker contacts a local broker in the issuerrsquos home market

The local broker purchases ordinary shares on an exchange in the local market

Ordinary shares are deposited with a local custodian

The local custodian instructs the depositary to issue DRs that represent the shares received

The depositary issues DRs and delivers them in physical form or book entry form

The broker delivers DRs to the investor or credits the investorrsquos account

1

2

3

4

5

6

7

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Depositary ReceiptGlobal Depository Receipt (GDR)American Deposit Receipt (ADR)

Foreign Currency Convertible Bond (FCCB)

Euro Medium Term Notes Program

A depository is like a bank wherein the deposits are securities (viz shares debentures bonds government securities units etc) in electronic form at the request of the shareholder through the medium of a Depository Participant

If an investor wants to utilize the services offered by a Depository the investor has to open an account with the Depository through a Depository Participant

A Depositary Receipt is a negotiable security that represents an

ownership interest in securities of a foreign issuer typically trading outside

its home market

Depositary Receipts are created when a broker purchases a foreign

companys shares on its home stock market and delivers the shares to the

depositarys local custodian bank and then instructs the depositary

bank to issue Depositary Receipts

In addition Depositary Receipts may also be purchased in the secondary

trading market

They may trade freely just like any other security either on an exchange

or in the over-the-counter market and can be used to raise capital

ADRs were the first type of depositary receipt to evolve They were

introduced in 1927 in response to a law passed in Britain which

prohibited British companies from registering shares overseas without a

British-based transfer agent

ADR- American Depositary Receipts A negotiable certificate issued by a US bank Represents a specified number of shares of a foreign

company ADRs are denominated in US dollars Give Non-US companies access to the US capital

markets

GDR- Global Depositary Receipts A bank certificate issued in more than one country for

shares in a foreign company Offered for sale globally through the various bank

branches Shares trade as domestic shares Provide exposure to the global markets (except US)

outside the issuerrsquos home market

Let us take Patni example ndash trades on the Indian stock at around Rs460-

This is equivalent to US$ 10 ndash assume for simplicity Now a US bank purchases 10000 shares of Patni and issues

them in US in the ratio of 101 This means 1 ADR purchased is worth 10 Patni shares Quick calculation means 1 ADR = US $100 Once ADR are priced and sold its subsequent price is

determined by supply and demand factors like any ordinary shares

COMPANY SHARE

DEPOSITARY BANK

INVESTOR

DR Issuance ProcessDR Issuance Process

US Broker

Depository(JP Morgan NY)

India Broker

Local Custodian(JP Morgan Mumbai)

US Investor

17

2

3

4

5

6 SENSEX

Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins

To issue new DRs the broker contacts a local broker in the issuerrsquos home market

The local broker purchases ordinary shares on an exchange in the local market

Ordinary shares are deposited with a local custodian

The local custodian instructs the depositary to issue DRs that represent the shares received

The depositary issues DRs and delivers them in physical form or book entry form

The broker delivers DRs to the investor or credits the investorrsquos account

1

2

3

4

5

6

7

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

A depository is like a bank wherein the deposits are securities (viz shares debentures bonds government securities units etc) in electronic form at the request of the shareholder through the medium of a Depository Participant

If an investor wants to utilize the services offered by a Depository the investor has to open an account with the Depository through a Depository Participant

A Depositary Receipt is a negotiable security that represents an

ownership interest in securities of a foreign issuer typically trading outside

its home market

Depositary Receipts are created when a broker purchases a foreign

companys shares on its home stock market and delivers the shares to the

depositarys local custodian bank and then instructs the depositary

bank to issue Depositary Receipts

In addition Depositary Receipts may also be purchased in the secondary

trading market

They may trade freely just like any other security either on an exchange

or in the over-the-counter market and can be used to raise capital

ADRs were the first type of depositary receipt to evolve They were

introduced in 1927 in response to a law passed in Britain which

prohibited British companies from registering shares overseas without a

British-based transfer agent

ADR- American Depositary Receipts A negotiable certificate issued by a US bank Represents a specified number of shares of a foreign

company ADRs are denominated in US dollars Give Non-US companies access to the US capital

markets

GDR- Global Depositary Receipts A bank certificate issued in more than one country for

shares in a foreign company Offered for sale globally through the various bank

branches Shares trade as domestic shares Provide exposure to the global markets (except US)

outside the issuerrsquos home market

Let us take Patni example ndash trades on the Indian stock at around Rs460-

This is equivalent to US$ 10 ndash assume for simplicity Now a US bank purchases 10000 shares of Patni and issues

them in US in the ratio of 101 This means 1 ADR purchased is worth 10 Patni shares Quick calculation means 1 ADR = US $100 Once ADR are priced and sold its subsequent price is

determined by supply and demand factors like any ordinary shares

COMPANY SHARE

DEPOSITARY BANK

INVESTOR

DR Issuance ProcessDR Issuance Process

US Broker

Depository(JP Morgan NY)

India Broker

Local Custodian(JP Morgan Mumbai)

US Investor

17

2

3

4

5

6 SENSEX

Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins

To issue new DRs the broker contacts a local broker in the issuerrsquos home market

The local broker purchases ordinary shares on an exchange in the local market

Ordinary shares are deposited with a local custodian

The local custodian instructs the depositary to issue DRs that represent the shares received

The depositary issues DRs and delivers them in physical form or book entry form

The broker delivers DRs to the investor or credits the investorrsquos account

1

2

3

4

5

6

7

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

A Depositary Receipt is a negotiable security that represents an

ownership interest in securities of a foreign issuer typically trading outside

its home market

Depositary Receipts are created when a broker purchases a foreign

companys shares on its home stock market and delivers the shares to the

depositarys local custodian bank and then instructs the depositary

bank to issue Depositary Receipts

In addition Depositary Receipts may also be purchased in the secondary

trading market

They may trade freely just like any other security either on an exchange

or in the over-the-counter market and can be used to raise capital

ADRs were the first type of depositary receipt to evolve They were

introduced in 1927 in response to a law passed in Britain which

prohibited British companies from registering shares overseas without a

British-based transfer agent

ADR- American Depositary Receipts A negotiable certificate issued by a US bank Represents a specified number of shares of a foreign

company ADRs are denominated in US dollars Give Non-US companies access to the US capital

markets

GDR- Global Depositary Receipts A bank certificate issued in more than one country for

shares in a foreign company Offered for sale globally through the various bank

branches Shares trade as domestic shares Provide exposure to the global markets (except US)

outside the issuerrsquos home market

Let us take Patni example ndash trades on the Indian stock at around Rs460-

This is equivalent to US$ 10 ndash assume for simplicity Now a US bank purchases 10000 shares of Patni and issues

them in US in the ratio of 101 This means 1 ADR purchased is worth 10 Patni shares Quick calculation means 1 ADR = US $100 Once ADR are priced and sold its subsequent price is

determined by supply and demand factors like any ordinary shares

COMPANY SHARE

DEPOSITARY BANK

INVESTOR

DR Issuance ProcessDR Issuance Process

US Broker

Depository(JP Morgan NY)

India Broker

Local Custodian(JP Morgan Mumbai)

US Investor

17

2

3

4

5

6 SENSEX

Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins

To issue new DRs the broker contacts a local broker in the issuerrsquos home market

The local broker purchases ordinary shares on an exchange in the local market

Ordinary shares are deposited with a local custodian

The local custodian instructs the depositary to issue DRs that represent the shares received

The depositary issues DRs and delivers them in physical form or book entry form

The broker delivers DRs to the investor or credits the investorrsquos account

1

2

3

4

5

6

7

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

ADR- American Depositary Receipts A negotiable certificate issued by a US bank Represents a specified number of shares of a foreign

company ADRs are denominated in US dollars Give Non-US companies access to the US capital

markets

GDR- Global Depositary Receipts A bank certificate issued in more than one country for

shares in a foreign company Offered for sale globally through the various bank

branches Shares trade as domestic shares Provide exposure to the global markets (except US)

outside the issuerrsquos home market

Let us take Patni example ndash trades on the Indian stock at around Rs460-

This is equivalent to US$ 10 ndash assume for simplicity Now a US bank purchases 10000 shares of Patni and issues

them in US in the ratio of 101 This means 1 ADR purchased is worth 10 Patni shares Quick calculation means 1 ADR = US $100 Once ADR are priced and sold its subsequent price is

determined by supply and demand factors like any ordinary shares

COMPANY SHARE

DEPOSITARY BANK

INVESTOR

DR Issuance ProcessDR Issuance Process

US Broker

Depository(JP Morgan NY)

India Broker

Local Custodian(JP Morgan Mumbai)

US Investor

17

2

3

4

5

6 SENSEX

Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins

To issue new DRs the broker contacts a local broker in the issuerrsquos home market

The local broker purchases ordinary shares on an exchange in the local market

Ordinary shares are deposited with a local custodian

The local custodian instructs the depositary to issue DRs that represent the shares received

The depositary issues DRs and delivers them in physical form or book entry form

The broker delivers DRs to the investor or credits the investorrsquos account

1

2

3

4

5

6

7

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Let us take Patni example ndash trades on the Indian stock at around Rs460-

This is equivalent to US$ 10 ndash assume for simplicity Now a US bank purchases 10000 shares of Patni and issues

them in US in the ratio of 101 This means 1 ADR purchased is worth 10 Patni shares Quick calculation means 1 ADR = US $100 Once ADR are priced and sold its subsequent price is

determined by supply and demand factors like any ordinary shares

COMPANY SHARE

DEPOSITARY BANK

INVESTOR

DR Issuance ProcessDR Issuance Process

US Broker

Depository(JP Morgan NY)

India Broker

Local Custodian(JP Morgan Mumbai)

US Investor

17

2

3

4

5

6 SENSEX

Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins

To issue new DRs the broker contacts a local broker in the issuerrsquos home market

The local broker purchases ordinary shares on an exchange in the local market

Ordinary shares are deposited with a local custodian

The local custodian instructs the depositary to issue DRs that represent the shares received

The depositary issues DRs and delivers them in physical form or book entry form

The broker delivers DRs to the investor or credits the investorrsquos account

1

2

3

4

5

6

7

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

COMPANY SHARE

DEPOSITARY BANK

INVESTOR

DR Issuance ProcessDR Issuance Process

US Broker

Depository(JP Morgan NY)

India Broker

Local Custodian(JP Morgan Mumbai)

US Investor

17

2

3

4

5

6 SENSEX

Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins

To issue new DRs the broker contacts a local broker in the issuerrsquos home market

The local broker purchases ordinary shares on an exchange in the local market

Ordinary shares are deposited with a local custodian

The local custodian instructs the depositary to issue DRs that represent the shares received

The depositary issues DRs and delivers them in physical form or book entry form

The broker delivers DRs to the investor or credits the investorrsquos account

1

2

3

4

5

6

7

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

DR Issuance ProcessDR Issuance Process

US Broker

Depository(JP Morgan NY)

India Broker

Local Custodian(JP Morgan Mumbai)

US Investor

17

2

3

4

5

6 SENSEX

Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins

To issue new DRs the broker contacts a local broker in the issuerrsquos home market

The local broker purchases ordinary shares on an exchange in the local market

Ordinary shares are deposited with a local custodian

The local custodian instructs the depositary to issue DRs that represent the shares received

The depositary issues DRs and delivers them in physical form or book entry form

The broker delivers DRs to the investor or credits the investorrsquos account

1

2

3

4

5

6

7

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

DR Cancellation ProcessDR Cancellation Process

DR Broker

Local Broker

Depository(JP Morgan NY)

Local Custodian(JP Morgan Mum)

US Investor

2

3

4

The investor instructs the broker to cancel DRs

The broker delivers the DRs to the depositary for cancellation

The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market

The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor

1

2

3

4

1

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Indian companies can raise foreign currency resources abroad through the issue of ADRs GDRs in accordance with the Scheme for issue of FCCB and Ordinary Shares (Through DR Mechanism) Scheme 1993 and guidelines issued by the GoI

A company can issue ADRs GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme However an Indian listed company which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by SEBI will not be eligible to issue ADRsGDRs

Unlisted companies which have not yet accessed the ADRGDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments Unlisted companies which have already issued ADRsGDRs in the international market have to list in the domestic market on making profit or within 3 years of such issue of ADRsGDRs whichever is earlier

After the issue of ADRsGDRs the company has to file a return in Form DR as indicated in the RBI Notification

There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets

Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy sell or deal in securities by SEBI will not be eligible to subscribe to ADRs GDRs issued by Indian companies

The pricing of ADR GDR issues including sponsored ADRs GDRs should be made at a price determined under the provisions of the Scheme of issue of FCCB and Ordinary Shares 1993 and guidelines issued by the GoI and directions issued by RBI

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Issued by one depository appointed by the company under a Deposit Agreement or service contract

May be issued in different levels (level I II or III)

Company bears all expenses

New capital may also be raised under this option

Set up at the request of 3rd party without any formal agreement with company

Issued by one or more depositories in response to market demand

3rd party pays all set up and maintenance expenses

No new capital is raised

Types of DRs

Sponsored DRs Unsponsored DRs

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Level I ADR Over-the-Counter (OTC) Traded

Level I GDR Unlisted

Level II ADRUS Listed

Level II GDRInternationally Listed

Level III ADRUS Listed

Level III GDRInternationally Listed

Selling New Shares

(Capital Raising Transactions)

Existing Shares Only

(Non-Capital Raising Transactions)

Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)

Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S

Issuer

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Issuer Depository

At the time of offeringhellip Prepare documentation working

with advisors Interact with listing authority and

respond to all questions IR PR targeted program

Ongoinghellip Provide depositary and custodian

with notices of dividends rights offerings and other corporate actions including meeting notices

Ongoing compliance with stock exchange and international regulations including disclosure and reporting

Execute internationally-focused investor relations plan

Keeps market informed of developments through PRs

Regular meetings with institutional investors holding company DRs

At the time of offeringhellip Provide advice perspective on

type of program exchange or market on which to list or quote and advise on DR ratio

Appoint custodian Coordinate with all parties for

timely launch Coordinate with legal counsel on

Deposit Agreement and securities law

matters as appropriate Announce DR program to market

Ongoinghellip Coordinate with issuer to

announce and process corporate actions such as dividends and shareholdersrsquo meetings

Work with Issuer to maintain active DR program

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

At the time of offeringhellip Prepare (issuer counsel) andor

review (depositary counsel) offering circular and interact with authorities

Prepare draft deposit agreement (depositary bankrsquos counsel)

Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)

Ongoinghellip Manage compliance with

securities laws rules and regulations and perfect any securities law exemptions

Provide corporate action support whenever required

Legal Counsel

At the time of offeringhellip Advise on size pricing and

marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares

Act as placement agent or underwriter in offering

Conduct road shows with management introduce issuer to institutional and other investors

Line up selected dealers and co-underwriters

Ongoinghellip Cover issuer through research

reports promote DRs to investors Advise on road shows invest or

meetings investors to target

I-Banks Underwriters

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

At the time of offeringhellip Receive local shares in issuerrsquos

home country and confirm receipt

Ongoinghellip Hold shares in custody for the

account of depositary Receive and deliver shares in

accordance with depositaryrsquos instructions

Custodian

At the time of offeringhellip Develop long-term plan to raise

awareness of issuerrsquos program in markets in which GDRs will trade

Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)

Ongoinghellip Coordinate with issuerrsquos

advertising and public relations teams on specific program plans to support and develop company image

Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets

Arrange regular meetings for issuer with investors to keep them informed of developments results

Investor Relation Firm

At the time of offeringhellip Prepare companyrsquos accounts for

insertion into the prospectus Review prospectus and interact

with authorities

Ongoinghellip Audit and prepare accounts

Accountants

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio

The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades

DRs are most commonly priced between $7 and $20

The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7

Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest

Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

The issuer must meet each of the following criteria determined on a worldwide basis

Pre-tax income of $100 million cumulative for the last 3 years

Minimum pre-tax income of $25 million in each of the 2 most recent years

In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million

together with revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

25 million publicly held shares worldwide with a market value of $100 million

5000 round lot shareholders worldwide (holding units of 100 or more shares)

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Size and earningsThe issuer must meet one of the following

criteria 1048708 Aggregate pre-tax earnings of $10

million cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Not less than $500 million of global market capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or

Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year

In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

11 million publicly held shares (A) 2000 round lot shareholdersin the

US or (B) 2200 total shareholders together with average monthly trading volume of 100000 shares for the most recent 6 months or (C) 500 total shareholders together with average monthly trading volume of 1 million shares for the most recent 12 months

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding

Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000

The total fees that can be billed to an issuer in any calendar year are capped at $500000

These fees apply to both US and foreign listed companies

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

NASDAQ National Market Size amp Earnings The issuer must meet one of the

following 3 alternative criteria1 Stockholdersrsquo equity of at least $15

million together with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or

3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Public float of 11 million shares with a minimum bid price of $5

Minimum of 400 round lot shareholders (each owning 100 shares or more)

Minimum of three market makers except thta four are required if alternative 3 under ldquoSize and earningsrdquo is utlizied

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Size and earningsThe issuer must meet one of the following

3 alternative criteria1 Stockholdersrsquo equity of at least $5

million or2 $50 million in market value of listed

securities or3 $750000 in net income from

continuing operations in latest fiscal year or in two of the last three fiscal years

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Public float of at least 1 million shares having a market value of $5 million and a minimum bid price of $4 in addition for ADR listings at least 100000 ADRs must be issued

Minimum of 300 round lot shareholders (each owning 100 or more shares)

Minimum of three market makers

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding

Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

One way Fungibility Conversion of ADRGDR into shares of

Indian Company After conversion it was not possible for

reconversion of shares into ADRGDR

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Two way Fungibility Two-way Fungibility of ADRsGDRs issued

by Indian Companies was permitted by the Government of India and the RBI

The present rules of the RBI make such reconversion possible to the extent of ADR GDR which have been converted into equity shares and sold in the local market

Two-way fungibility implies that an investor who holds ADRsGDRs can cancel them with the depository and sell the underlying shares in the market The company can then issue fresh ADRs to the extent of shares cancelled

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Funjability Continuehellip This would take place in the following

manner

Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion

The Domestic Custodian would coordinate with the Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached

The Domestic Custodian would then inform the Overseas Depository to issue ADR GDR to the overseas Investor

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Improvement in Liquidity Elimination of arbitrage

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

The issuing company intimates the depository when the dividend record and payment dates for the underlying shares is established

The Depositary will Set a DR record date amp payment date and communicate these dates to

markets Announce preliminary (estimated) dividend payment rates based upon

the exchange rate between the domestic currency and the currency of DR on the date of the announcement

On the dividend payment date in the home market the custodian receives the dividend owed on the underlying shares The depositary will then arrange for the dividend received to be converted from domestic currency into currency of DR

Distribute the net dividend amount net of any required tax withholding and any fees to the DR holders entitled thereto

As the DR investor carries the foreign currency risk the amount of the dividend will affected by any movement of the currency of DR against the home market currency

In case of a stock dividend additional DRs are distributed to DR holders

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

DR holders have no direct voting rights on the shares underlying

the DRs

In case the issuer gives its DR holders the right to vote in

shareholdersrsquo meeting it instructs the depository to initiate the

DR proxy process

Depository (complying with the applicable legal provisions)

establishes the record date mailing date and voting cut-off date

Depository informs key dates to issuer and local custodian bank

(LCB)

Issuer provides depository with draft of agenda items amp company

notice

Depository provides draft of depository notice of meeting and

voting card to issuing company for review Upon approval

depository arranges for final voting packages to be prepared and

mailed to DR holders

DR holders review the voting materials amp submit their votes to

depository

Depository tabulates the DR holdersrsquo votes amp sends to issuer and

LCB

LCB forwards the results to the companyrsquos registrar or attends

the shareholdersrsquo meeting to vote accordingly

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer

bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5

bull Admission to trading on a Recognized Stock Exchange

bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned

bull Continuing obligations Various ongoing obligations on the part of issuing company include

bull Publication of an annual financial report within four months of its year end

bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner

These are specifically applicable to companies seeking to list its GDRs on LSE

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

A prospectus is the companyrsquos information and sales document which

enables market participants to create opinions and decide whether to

participate in the offering

A DR prospectus must include the necessary information that enables

investors to make an informed assessment of

the assets and liabilities financial position profits and losses and prospects of

the Company and

the rights attached to the DRs

An operating and financial review audited financial information for the last

three financial years or such shorter period as the Company has been in

operation In case the prospectus is more than nine months after the end

of last financial year unaudited half year accounts will also be included

The prospectus also requires details of any material contracts

Prospectus should also include a summary describing the Company that

includes any risks associated with investing in the Company

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Offer a new avenue for raising equity capital outside the issuerrsquos

home market

Broaden and diversify a companyrsquos investor base

Establishincrease total global issuer liquidity by attracting new

investors

Enhance a companyrsquos visibility status and profile internationally

among institutional investors

Develop andor increase research coverage outside the home

market

Get an international valuation as the Company is valued alongside

its peer group

Adjust share price levels to those of peers through DR Ratio

Facilitate MampA activity through use as acquisition currency

Expand opportunity to increase local share price as a result of

global demandtrading

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Facilitate diversification into securities of foreign issuers

Represent a way to provide international exposure for institutional

investors (mutual funds pension funds) despite restrictions against

investing in certain countries or in foreign investment instruments

Easier to purchase and to hold than the issuerrsquos underlying ordinary

shares

Trade easily and conveniently in US dollars and settle through

established clearinghouses

Ability to acquire the underlying securities directly upon cancellation

(two-way fungibility)

Create accessibility of price trading information and research

Provide dividend payments in US dollars and corporate action

(meetings of shareholders rights offerings exchange offers tender

offers etc) notifications in English

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets

European markets are more liberal than the American markets

Companies get more flexibility in terms of currencies as well

Companies here want to capitalise on foreign investor interest as much as possible

The need of Indian corporates for funds is so huge and with debt being very expensive

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Tata Steel raised $500 million while Suzlon raised $1084 million through

146 million GDRs and Tata Power has raised $335 million

through the GDR route

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Indian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company

In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

605A Offer of Indian Depository ReceiptsNotwithstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-(a) the offer of Indian Depository Receipts

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts

(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters

(d) the manner of sale transfer or transmission of Indian Depository Receiptsby a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India]

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying sharesIssuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

An IDR holder will be entitled to rights on an equitable basis vis-agrave-vis the rights of shareholders of the issuer company in its home country

Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and

consolidations of underlying equity shares minus Participation in other distributions and

corporate actions

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is

like that of equity shares of Indian companies Can convert IDRs into underlying equity shares

only after 1 year and with the prior approval of the RBI

Upon such conversion resident individual investors are allowed to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion

Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

There will be a small charge payable by IDR holders for the services provided by the Domestic Depository and the Overseas Custodian

Similar charges are payable by holders of ADRs and GDRs of Indian companies for depositary and custody services

Secondary trading of IDRs are not subject to Securities Transaction Tax (ldquoSTTrdquo) and hence capital gains tax will be applicable on any trading profits

Dividend distribution tax is not payable by the issuer company and hence such tax will be payable by the IDR holders

The Direct Taxes Code (ldquoDTCrdquo) as currently drafted does not distinguish between capital gains tax treatment of listed shares and other assets such as IDRs so if the DTC is implemented in its present form there will be parity of treatment As the DTC has not yet been implemented the provisions summarised above could change

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

The issue opened for subscription by investors on May 25 2010 and closed on May 28 2010 subscribed 220 timesThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off priceUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issueJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issueStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issueJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issueKarvy Computershare Private Limited is the registar to the companyThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

The details of the Issue Subscription are given below

Category Shares offered

Shares Bid

Subscription ratio

QIB 84000000 348394400 41476

NII 43200000 82150400 19016

Retail 72000000 18210200 02529

Employee 4800000 950000 01979

Total 204000000

449705000

220

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc

1 wwwrbiorgin

2 wwwicwaiorg

3 wwwsebigovin

4 wwwnirmalbangcom

5 httpknolgooglecomkadr-gdr-fccb-issues-indian-regulations

6 httpwwwbourselucontenudocscommunsocieteEvents2008Listing_abroad_when_offer_meets_demandpdf

7 httpwwwwikinvestcomstockHDFC_Bank_LTD_Ads_(HDB)Fungibility20Adrstoc