The M.S. Sahoo Committee, set up to review the Global Depository Receipts, Foreign Currency Convertible Bonds and overseas issuances by unlisted Indian companies met in Mumbai on Monday.
The Committee consists of G. Padmanabhan, Executive Director, RBI; S, Ravindran, Executive Director, SEBI; Ajay Shah of NIPFP; P.R. Suresh, Consultant, PMEAC; Pratik Gupta, Deutsche Equities and Somasekhar Sundaresan, Partner, J. Sagar Associates.
When contacted, M.S. Sahoo, Chairman of the Committee said: “The GDR and FCCB scheme would be fully reviewed and streamlined in the light of the recently passed Companies Act and extant securities laws. The Finance Ministry’s recent notification to allow unlisted companies to list abroad would also be evaluated in the light of uncertain market and macro economic conditions.”
Another member of the Committee said: “The committee would recommend the safeguards required to be put in place, factoring in the FDI policy, Prevention of Money Laundering Act and plugging loopholes in the existing mechanism for issuing GDRs and FCCBs.”
IOSCO/FATF compliant
Last month’s notification from the Finance Ministry had mandated that unlisted companies would be allowed to list abroad only on exchanges in IOSCO/FATF compliant jurisdictions or those with which SEBI had signed bilateral agreements.
It further added that compliance with SEBI’s disclosure requirements was mandatory in addition to the exchange where the company would be listed.
Capital raised abroad could be used only to retire overseas debt or for overseas operations and unutilised funds could be parked only with Indian banks.
Companies are allowed to issue GDRs and FCCBs under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993.
Global Depository Receipts are receipts denominated in foreign currency created by a depository in the country of listing against the underlying equity shares of the Indian company in a predetermined ratio, say, six shares equal one GDR.
They are issued to foreign investors in their currency through a public offering and are listed on a designated exchange. Shares against which the GDRs are issued are kept aside separately.
Foreign Currency Convertible Bonds are bonds issued by Indian companies in a foreign currency at a stated interest rate (coupon rate).
Bonds holders have the option of converting them into equity at a price that is pre-agreed.