Govt eases norms for GDR issues

JANUARY 19: The government on Wednesday said Indian firms raising funds through American Depository Receipts ADRs/global depositary rece...

JANUARY 19: The government on Wednesday said Indian firms raising funds through American Depository Receipts ADRs/global depositary receipts GDRs through registered stock exchanges could now access these markets without prior approval from the Ministry of Finance.

quot;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,quot; guidelines issued by the Ministry of Finance on Wednesday said.

quot;Private placement of ADRs/GDRs would also be eligible for the automatic approval route, provided the issue is lead managed by an investment banker,quot; the guidelines said.

quot;For the purpose of this scheme, an investment banker wouldbe defined as an investment banker registered with the Securites and Exchange Commission in the USA, or under Financial Services Act in UK, or the appropriate regulatory authority in Europe, Singapore or in Japan,quot; the guidelines said.

The guidelines also said the automatic route for ADR/GDR issues would include employee stock options by Indian software companies and firms in the information technology sector in line with guidelines issued in 1998.

quot;Issues of ADRs/GDRs arising out of business reorganisation/merger/demerger would also be governed by automatic route subject to the guidelines issued by this department on August 17, 1998.quot;

The guidelines also said the two-stage approval for ADR/GDR issues and the track record scrutiny for such issues could be dispensed with. quot;Further the issues of ADRs/GDRs under the liberalisedguidelines would be only against expansion of the existing capital base through issuance of fresh equity shares as underlying shares for ADRs/GDRs,quot; the guidelines said.