Sub Section - II
Issues by foreign companies in India (Indian Depository Receipts)(IDRs)
This sub‐section attempts to cover the basic concepts and questions related to issuance of Indian depository receipts (IDRs) by foreign companies. For full particulars of laws governing primary markets, please refer to the Acts/Regulations/Guidelines appearing in the Legal Framework Section. 1. Whether a foreign company can access Indian securities market for raising funds?
Yes, a foreign company can access Indian securities market for raising funds through issue of Indian Depository Receipts (IDRs)
2. What is an Indian Depository Receipts (IDRs)?
An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with the Securities and Exchange Board of India) against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities Markets.
3. Which are all the legislations governing IDRs?
Central Government notified the Companies (Issue of Indian Depository Receipts) Rules, 2004 (IDR Rules) pursuant to the section 605 A of the companies Act. SEBI issued guidelines for disclosure with respect to IDRs and notified the model listing agreement to be entered between exchange and the foreign issuer specifying continuous listing requirements.
4. Who is eligible to issue IDRs?
The eligibility criteria given under IDR Rules and Guidelines are as under‐:
The foreign issuing company shall have‐: • pre‐issue paid‐up capital and free reserves of at least US$ 50 million and have a
minimum average market capitalization (during the last 3 years) in its parent country of at least US$ 100 million;
• a continuous trading record or history on a stock exchange in its parent country for at least three immediately preceding years;
• a track record of distributable profits for at least three out of immediately preceding five years;
• listed in its home country and not been prohibited to issue securities by any Regulatory Body and has a good track record with respect to compliance with securities market...