Our Bureau

Mumbai, April 3

Paving the way for overseas companies to list on domestic stock exchanges, the Securities and Exchange Board of India on Monday issued guidelines for Indian Depository Receipts (IDRs), stipulating that overseas companies should be listed on their home country to become eligible to issue IDRs.

SEBI also barred non-resident Indians and foreign institutional investors from purchasing IDRs, unless special permission of the Reserve Bank of India is taken. However, IDRs are open for investment to Qualified Institutional Buyers. The minimum size of an IDR issue should be Rs 50 crore and the minimum application amount should be Rs 2 lakh, SEBI said.

Investments by Indian companies in IDRs should not exceed the prescribed investment limits. Automatic fungibility of IDRs is not permitted as per the guidelines.

SEBI said IDRs should receive minimum subscription of 90 per cent of the issued amount. If the subscription level falls below 90 per cent after the closure of the issue, the company should refund the entire amount within eight days.

The company would have to pay an interest rate of 15 per cent per annum for any delay beyond eight days.

The issue price should be based on earnings per share pre-issue for the last three years, price by earnings ratio, average return on net worth in the last three years, net asset value per share based on last balance sheet, among other things.

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(This article was published in the Business Line print edition dated April 4, 2006)
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