MFs allowed to invest in GDRs

MUMBAI, SEPT 3: The Reserve Bank of India has given its approval to a proposal of the Securities and Exchange Board of India SEBI to al...

MUMBAI, SEPT 3: The Reserve Bank of India has given its approval to a proposal of the Securities and Exchange Board of India SEBI to allow mutual funds to invest in American depository receipts ADRs and global depository receipts GDRs of Indian companies.

SEBI has prescribed a minimum investment of 20 million by a mutual fund in ADRs/GDRs issued by Indian companies. The market regulator decided on Friday to allow mutual funds to invest in ADRs/GDRs subject to the condition that the investment by a mutual fund does not exceed 10 per cent of the net assets and subject to a minimum of 20 million and a maximum of 50 million.

The minimum investment norm of 20 million would mean that at current rates a fund cannot invest less than Rs 86 crore. Thus funds with less than Rs 860 crore assets would not be in a position to invest in the ADRs and GDRs. While this will ensure that small funds do not take exposure to the ADRs/GDRs, it will keep even large funds away from such investments. 8220;A minimumexposure of 20 million is a difficult proposition for even a large fund,8221; says a fund manager.

While ICICI has lined up an ADR issue of 315 million to be listed on the New York Stock Exchange, the ADRs of Infosys Technologies are traded on the Nasdaq. However, the Infosys ADRs are trading at a substantial premium over shares in the domestic market.

The overall ceiling for all mutual funds in India has been prescribed at 500 million. The Reserve Bank of India in its October 1997 credit policy has announced that mutual funds would be permitted to invest in overseas markets. SEBI had constituted a working group to frame the guidelines for domestic funds to invest in overseas markets. The group recommended that initially mutual funds be allowed to invest only in ADRs/GDRs issued by Indian companies.

Following approval from the RBI and the government SEBI has decided to permit overseas investments limited to Indian securities.

Corporate governance code

MUMBAI: The Securities and ExchangeBoard of India SEBI constituted committee on corporate governance CCG has decided that its report should revolve around shareholders8217; interests.

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In its meeting here today, the Kumar Mangalam Birla panel felt that the issue should be focused on enhancing shareholder value, while ensuring sufficient protection to stakeholders like creditors and suppliers, SEBI chairman D R Mehta said.

The committee had a brainstorming session on suggestions of its three sub-committees on shareholders, board of directors and management perspectives, but it has not taken conclusive decision on any issue, he said. Draft report of the committee based on deliberations would be released during the month, following which suggestions from various related sections of people would be solicited, he said.