NEW DELHI, JANUARY 19: The government on Wednesday said Indian firms raising funds through American depository receipts (ADRs)/global depository receipts (GDRs) via registered stock exchanges could now access these markets without prior approval from the Ministry of Finance."Indian companies raising money through ADRs/GDRs through registered exchanges would henceforth be free to access the ADR/GDR markets through an automatic route without prior approval of the Ministry of Finance, Department of Economic Affairs," guidelines issued by the Ministry of Finance on Wednesday said.Moreover, private placement of ADRs and GDRs would be eligible for automatic approval provided the issue is lead managed by an investment banker, registered with the Securities and Exchange Commission in the US or under Financial Services Act in UK, or appropriate regulatory authority in Europe, Singapore or Japan. The liberalisation, it was stated, would not extend to Foreign Currency Convertible Bond (FCCB) issues which continueto be governed by existing guidelines.It was further clarified that the issue of ADRs and GDRs under the liberalised guidelines would be only against expansion of the existing capital base through issuance of fresh equity shares as underlying shares for ADRs and GDRs.The automatic route for ADR and GDR would also cover the issue of employee stock options by the Indian software companies in the IT sector as per the guidelines issued earlier. The issue of ADRs and GDRs arising out of business reorganisation, merger and demerger would also be governed by automatic route subject to the earlier guidelines.As ADR and GDR are reckoned as part of FDI, such issues will have to conform to the existing FDI policy and will apply to areas where FDI is permissible. In all cases of automatic approval, companies would be required to obtain mandatory clearance under the FDI policy and the Companies Act prior to the ADR and GDR issues. Also, they will have to obtain the RBI approval under the provisions of FERA/FEMAprior to an overseas issue.The new guidelines stipulate that the companies will be required to furnish full particulars to finance ministry and exchange control department of RBI within 30 days of completion of such transactions. The new guidelines, the official note said, will extend to proposals which have already been filed with the finance ministry and also in cases where in-principle approval has been obtained.Existing guidelines on Euro issues providing for the option of retention of issue proceeds or repatriation of funds into the country in anticipation of deployment towards the purposes, for which the funds was raised, would remain in force. Norms governing retention and deployment of funds abroad had already been prescribed by Reserve Bank of India.
