Automatic access to ADR, GDR markets allowed

NEW DELHI, JAN. 19. In a significant move, Indian companies were today allowed to make international offerings without prior Government approval for widening their capital base.

The liberalised guidelines said the free access to American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) markets would be allowed only if the issues were managed by investment banker registered with the Securities Exchange Board of India (SEBI). This liberalisation, however, did not extend to foreign convertible bond issues which would continue to be governed by existing guidelines.

An official press release said this automatic approval for tapping ADR and GDR markets would be only against expansion of existing capital base through issuance of fresh equity.

The automatic route of ADR and GDR issue would also cover issue of employee stock options by Indian software companies and other companies in the information technology sector in conformity with the guidelines issued in this regard.

The release said the issue of ADRs and GDRs arising out of business reorganisation, merger and demerger would also be governed by automatic route subject to the guidelines issued by the department. Since these issues are part of the foreign direct investment (FDI), they would need to conform to the existing FDI policy and only in areas where FDI is permissible.

In all such cases of automatic approval, the mandatory approval requirement under FDI policy, approvals such as under the Companies Act, approvals for overseas investments/business acquisition where ADR and GDR proceeds are utilised for overseas investments, would need to be obtained by the company prior to the ADR and GDR issues.

The issuer company would need to obtain RBI approval under the provisions of Foreign Exchange Regulation Act (FERA) and Foreign Exchange Management Act (FEMA) prior to the overseas issue.

The release said the existing provisions under the ADR and GDR guidelines relating to retention of funds abroad, repatriation and end uses would continue to be applicable. After completing the transactions, the companies would be required to furnish full particulars to the Ministry of Finance, Department of Economic Affairs and the Exchange Control Department of the RBI, Mumbai, within 30 days of completion of such transactions.

The release says the scheme for issue of foreign currency convertible bonds and ordinary shares (through depository receipts mechanism) was notified by the Government in November 1993 and added that revisions and modifications in the operative guidelines for euro issues are announced from time to time. - PTI

Send this article to Friends by E-Mail

Section  : Business
Previous : Exchange rates
Next     : ACC suffers setback