presentation on gdr issue jhsdjw g dwgdbw dwgd7wbdw wuid nfvwyd wndbwygw2bdn fhw

8/10/2019 Presentation on GDR Issue jhsdjw g dwgdbw dwgd7wbdw wuid nfvwyd wndbwygw2bdn fhw

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Global DepositoryReceipts (GDR)

Compliance,

Procedure and Listing


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What is a GDR?

It is an instrument in the form of a depository

receipt or certificate created by the Overseas

Depository Bank outside India and issued to

Non- resident investor against the issue ofordinary shares or Foreign Currency

Convertible Bonds of Issuing Company.


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Eligibility for Issue of GDRs

An Indian corporate can raise foreign currency

resources abroad through the issue of Global

Depository Receipts (GDRs). Regulation 4 of

Schedule I of FEMA Notification no. 20 allows anIndian company to issue its Rupee denominated

shares to a person resident outside India being a

depository for the purpose of issuing GDRs.


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Conditions for Issue of GDRs

The GDRs are issued in accordance with theScheme for issue of Foreign CurrencyConvertible Bonds and Ordinary Shares(Through Depository Receipt Mechanism)

Scheme, 1993 and guidelines issued by theCentral Government thereunder from time totime.

A GDR is permitted by RBI under Automatic

Route subject to the sectoral caps as specifiedvide Press Note No.14 (1997 series) dated 8thOctober 1997 issued by the Government ofIndia, Ministry of Industry.


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contd The company not covered under the Automatic route,

would need to obtain prior Government clearance

through FIPB.

There are no end-use restrictions on GDR/ADR issue

proceeds, except for an express ban on investment in

real estate and stock markets.

There is no limit up to which an Indian company can

raise GDRs.

There is no restriction on the number of Euro-Issues to

be floated by a company or a group of companies in a

financial year.


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contd Indian Companies engaged in the following sectors

were 80% of turnover is from these sectors in 3previous financial years can issue GDRs to their Non-Resident/Resident Permanent Employees and also totheir subsidiary Companies:

a Information Technology and EntertainmentSoftware.

b Pharmaceuticals

c Bio Technology

These Companies can also acquire overseascompanies in their respective areas of businessthrough stock swap as per the guidelines issued by thegovernment


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contd GDR can be issued in any convertible foreign currency.

The GDRs and the Shares to be represented by suchGDRs will not be offered, sold or delivered within the

United States or to or for the benefit of US persons asper the United States Securities Act of 1933, asamended (the "Secu ri t ies Act") for a period of 40 daysfrom the date of opening of the Issue.

The GDRs may not be offered or sold directly orindirectly in the Republic of India ("India") or to, or for theaccount or benefit of, any resident of India.


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Agencies Involved in the GDR Issue

Lead Manager -The firm should be registered with theappropriate regulatory authority in Europe/ Singapore orJapan.

Depository Is an Overseas Bank authorised by theIssuing Company to Issue the GDRs.

Listing Agent - Is a person who is responsible for the

listing of the GDRs at any of the recognized OverseasStock Exchanges. Generally the Depository also acts asthe Listing Agent.


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contd

Custodian - It is the domestic Bank who holds theunderlying shares/ Bonds Issued against the GDRs.

Indian Legal Counsel - It is a firm that undertakes theLegal and Financial Due Diligence of the IssuingCompanies on behalf of the Lead Manager. It alsoassists the Company in preparation of the InformationMemorandum/ offer document for submitting it with theOverseas Stock Exchange.


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contd

UK Counsel- An overseas legal person who based on

the Due Diligence Report of the Indian Counsel submits

its report to the Overseas Stock Exchange. They also

assist the Lead Manager in preparation of the various

documents such as the Deposit Agreement, SubscriptionAgreement and vet the Information Memorandum (IM).

Escrow Agent - An Overseas Bank where an Escrow

Account has to be opened for deposit of the moniesreceived from Investors against the GDR Issue till the

Final Listing Approval is obtained from the Overseas

Stock Exchange


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Procedure for Issue of GDRs

Convene a Board Meeting to approve the proposedGDR Issue for not exceeding certain value in foreigncurrency.

Convene the EGM for the approval of theshareholders for the proposed GDR Issue under Sec

81(1A) of the Companies Act, 1956. Identify the Agencies

Convene a Board Meeting to approve the Agencies.

Appoint the Agencies and sign the Engagement

Letters. The Indian Legal Counsel to undertake the Due

Diligence.


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contd

Prepare the first draft of the IM in consultation with theIndian Legal Counsel and submit the same to various

Agencies for their comments thereon.

Prepare the 2nd/3rd draft of IM incorporating the

comments. The Listing Agent to submit the IM with the overseas

Stock Exchange for their comments and In principleListing Approval.

Simultaneously submit draft IM to the Indian StockExchanges where the Issuing Companys shares arelisted for In principle approval for listing of the underlyingshares.


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contd

Hold Board Meeting to approve the Deposit

Agreement, Subscription Agreement and the Escrow

Agreement.

On receipt of the comments on the IM from the

Overseas and Indian Stock Exchanges incorporate

the same and file the final IM with Overseas Stock

Exchange and obtain Final Listing.

The Issuing Company can open the Issue for theGDR on receipt of the In principle Listing Approval

from the Overseas and the Indian Stock Exchanges.


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contd Open the Escrow Account with the Escrow Agent and

execute the Escrow Agreement.

In consultation with the Lead Manager to finalize

- whether the GDR will be through public or a privateplacement,

- the number of GDRs to be issued.

- the issue price. (the Issue price is normally 5-10 %discounted prevalent market price of the shares of

the Issuing Company one day prior to the openingof the GDR Issue.

- number of underlying shares to be issued againsteach GDR.


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contd

On the day of the opening of the Issue execute theDeposit and Subscription Agreements.

The Issue should be kept open for a minimum period of

3 working days. Immediately on closing of the Issue convene a Board/

Committee Meeting for allotment of the underlyingshares against the Issue of the GDRs.

Then Deliver the share certificate to the DomesticCustodian Bank who will in terms of the Agreementinstruct the Overseas Depository Bank to Issue theGDR to Non Resident Investor against the shares heldby the Domestic Custodian Bank.


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contd

On receipt of Listing Approval from Overseas Stock

Exchange submit the required documents for Final In

principle Listing approval from Indian Stock Exchange.

After GDRs are listed the Lead Manager to instruct the

Escrow Agent to transfer the Funds to the Companys

Account.

The Company can either remit the entire funds or in part

as per its discretion.


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contd

On obtaining the Final Approval from Indian Stock

Exchanges admit the underlying shares to the depository

i.e., NSDL and CDSL.

Obtain Trading approval.

Intimate the Custodian for converting the physical shares

into Demat.


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Other Reporting Compliances and

Issues Within 30 days of the closing of the GDR issue, details of

the GDR Issue along with the IM should be submitted to

- the Ministry of Finance.

- the Registrar of Companies

- SEBI

Return of Allotment in Form 2 is to be filed with ROCwithin 30 days of Allotment.

Annexure C is to be filed with RBI, Central office within30 days of closure of the GDR Issue.


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Other Reporting Compliances and

Issues The Company should furnish quarterly return in

Annexure D to the RBI, Central office for every

calendar quarter.

The Issue related expenses (covering both fixed

expenses like underwriting commissions, lead

managers charges, legal expenses and other

reimbursable expenses) shall be subject to a ceiling of

4% in the case of GDR.

The GDR holders shall not have any voting rights.


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Conversion and Transfer of GDRs

The holder of the GDR can transfer/sell the GDR in the

Overseas Stock Exchange or request the Depository tocancel the GDR and release the underlying shares to hisaccount.

On acquiring the shares, the GDR holder becomes the

member of the Company and he can trade his shares inthe Indian Stock Exchanges.

A registered broker in India may, with the permission ofthe custodian purchase shares of an Indian Company on

behalf of a person resident outside India in therecognized Stock Exchange in India and deposit thesame with the custodian for the purpose of convertingthe shares into GDRs.


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Conversion and Transfer of GDRscontd

the number of shares so purchased shall not exceedGDRs converted into underlying shares and shall be

subject to sectoral caps as applicable.


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