IDR

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NAMAN (Querist)
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09 December 2010 The minimum turnover of a issuing company making IDR issue shall be average $5000 million in last three years or $500 million.

Ajay Mishra

Ajay Mishra (Expert)
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09 December 2010 Dear Naman

As per the definition given in the Companies (Issue of Indian Depository Receipts) Rules, 2004, IDR is an instrument in the form of a Depository Receipt created by the Indian depository in India against the underlying equity shares of the issuing company. In an IDR, foreign companies would issue shares, to an Indian Depository (say National Security Depository Limited – NSDL), which would in turn issue depository receipts to investors in India. The actual shares underlying the IDRs would be held by an Overseas Custodian, which shall authorise the Indian Depository to issue the IDRs. The IDRs would have following features:
Overseas Custodian : It is a foreign bank having branches in India and requires approval from Finance Ministry for acting as custodian and Indian depository has to be registered with SEBI.
Approvals for issue of IDRs : IDR issue will require approval from SEBI and application can be made for this purpose 90 days before the issue opening date.
Listing : These IDRs would be listed on stock exchanges in India and would be freely transferable.
Eligibility conditions for overseas companies to issue IDRs:
Capital : The overseas company intending to issue IDRs should have paid up capital and free reserve of atleast $ 100 million.
Sales turnover : It should have an average turnover of $ 500 million during the last three years.
Profits/dividend : Such company should also have earned profits in the last 5 years and should have declared dividend of at least 10% each year during this period.
Debt equity ratio : The pre-issue debt equity ratio of such company should not be more than 2:1.
Extent of issue : The issue during a particular year should not exceed 15% of the paid up capital plus free reserves.
Redemption : IDRs would not be redeemable into underlying equity shares before one year from date of issue.
Denomination : IDRs would be denominated in Indian rupees, irrespective of the denomination of underlying shares.
Benefits : In addition to other avenues, IDR is an additional investment opportunity for Indian investors for overseas investment.

Regards
CS Ajay Mishra

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