The Hindu Business Line : Pricing norms eased for ADR/GDR issues by listed Indian cos

The changes
The first change related to the timeline for determining the pricing
The other change related to the “relevant date”, which means the date of the meeting in which the board of the company decides to open the proposed issue.

Our Bureau

New Delhi, Nov. 27 The Finance Ministry has revised the pricing norms for Indian listed companies issuing American depository receipts (ADRs)/Global Depository Receipts (GDRs)/foreign currency convertible bonds (FCCBs).

The latest revision would bring the revised guidelines in alignment with the SEBI position on this matter.

Two main changes have now been brought about to the pricing norms. The first change related to the timeline for determining the pricing. The Government has now specified that the pricing should not be less than the average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the “relevant date”.

Hitherto, the pricing was linked to two averages. The Finance Ministry had earlier stipulated that the pricing should not be less than the higher of the two averages. The first average was the one on weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the “relevant date”. The second average was the average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange during the two week preceding the “relevant date”.

The other change related to the “relevant date”. Now the “relevant date” means date of the meeting in which the board of the company or the committee of directors, duly authorised by the board of the company, decides to open the proposed issue.

Earlier, the “relevant date” meant the date 30 days prior to the date on which the meeting of the general body of shareholders was held, in terms of section 81 (1A) of the Companies Act, 1956, to consider the proposed issue.

Commenting on the latest revision on the pricing norms, Mr Ashvin Parekh, Partner and national leader (Financial Services), Ernst & Young, told Business Line that the Finance Ministry along with SEBI were creating an enabling environment, for funds to flow, in preparedness of an expected improvement in liquidity situation in the developed markets in the next 2-3 quarters.

The latest revision would bring in flexibility to corporates as it allows valuation to be closer to the markets. “Pricing can now be in keeping with the market,” he said.

On the move to change the meaning of “relevant date”, Mr Parekh said that this move would make things “controllable” for the issuer as the earlier 30-day norm has been done away with. Earlier, there had to be a board meeting and also a shareholders’ meeting.

Mr Sanjay Hegde, Executive Director, PricewaterhouseCoopers (PwC) said that the recent amendment to the pricing norms was a welcome change and keeping in tune with the challenging environment in the capital/debt market.

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