Investors in Indian Depository Receipts (IDR) now have three options to exit.
SEBI’s guidelines on two-way fungibility for future and existing IDR issuers provides investors an option to convert IDRs into shares, or sell them in the foreign market where the shares are listed and receive the sale proceeds or both.
SEBI said that companies have to disclose all the three options in their offer document to investors. Companies cannot alter the options without SEBI’s approval.
With this, SEBI has allowed continuous two-way-fungibility of IDRs to investors after one year of listing. Two-way-fungibility refers to the conversion of shares into IDRs and vice versa by the holder of an IDR.
Redemption account
Companies have to move IDRs applied for fungibility to a redemption account.
This would be subject to headroom available for redemption. Headroom is the difference between the number of IDRs originally issued and the number of IDRs remaining after adjusting for IDRs converted to equity.
For companies that have already issued IDRs, redemption/ conversion would be provided to investors for up to 25 per cent of the original issuance. All three options have been allowed once a quarter with a seven-day window.
A 20 per cent reservation for retail investors has been stipulated.
IDRs are receipts denominated in Indian rupees created by a domestic depository against the underlying equity shares of an issuing company.
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