The Hindu Business Line : Indian depository receipts to be launched next year

In a move to provide fresh avenues to global companies to raise capital from the Indian markets and new investment opportunities to retail investors in India, SEBI is slated to introduce Indian Depository Receipts (IDRs) next year, according to Mr M. Damodaran, Chairman.

Delivering the ninth K.P. Hormis Memorial Lecture organised by Federal Bank, he also announced the setting up of an exclusive exchange for SMEs, a dedicated fund for investor education, de-mutualisation of regional stock exchanges and setting up of a world-class training centre for capital market personnel over the next 12-18 months.

The launch of IDRs is mainly aimed at helping foreign companies raise capital from the Indian market to fund their domestic operations as well as to provide local investors an exposure to global companies, according to some analysts.

Akin to Indian companies raising funds in foreign currency through ADRs and GDRs to fund their Indian operations, it would even be possible for foreign companies to raise funds in Indian currency through IDRs. The advent of the other major growth stories of the Asian continent, such as China and Korea, would provide greater depth and diverse asset class to the Indian investors, they said.

The Government had earlier notified that only strong global companies should be permitted to raise funds through IDRs; these must have a paid-up capital of $100 million, average turnover of $500 million during the preceding three years, profits for the past five years and a minimum dividend of 10 per cent. The advent of IDRs is expected to make the Indian capital market truly global in character.

The world-class training centre for capital market personnel would be undertaken in the public-private domain and is slated to come up in the outskirts of Mumbai.

Keeping in mind the growth and survival of regional exchange, it is time they evolved a new business model for themselves, Mr Damodaran said.

The Indian capital markets, where over 10,000 brokers and 33,000 sub-brokers are registered, are next only to the US in the number of listed companies.

It is also a matter of pride that almost 99 per cent of the total value of share settlements in India is today in dematerialised format, he said.

Discounting the exclusive dependency of Indian capital markets on FIIs, Mr Damodaran said that in recent times, there has been hardly any wholesale exodus by FIIs.

While some withdrew from the market, others were quick to take their place.

The presence of a large number of mutual funds - and their huge assets deployed - has also strengthened the market.

To ensure greater participation of the retail investor, new products based on gold and real estate would be introduced soon, he said.

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