Sectors eligible for ADR/GDR linked ESOP specified

By Our Special Correspondent

NEW DELHI, SEPT. 15. The Finance Ministry today specified the nature of knowledge-based industries which would be permitted to issue American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) as part of the Employees Stock Option Plan (ESOP). The issue of ADR/GDR-linked ESOP has been permitted in order to allow companies in knowledge-based industries to retain their highly skilled personnel.

According to the Ministry notification, the knowledge-based industries are those engaged in information technology (as defined in the recommendation number 19 (a) and (b) of the Gazette notification dated July 25, 1999, issued by the Planning Commission) and environment software. Also permitted are companies engaged in pharmaceuticals and biotechnology. Other activities within the knowledge-based sector eligible for such ESOP issues would be notified by the Government from time to time.

The liberalised norms would also be available to multi-product diversified companies which do not conform to the criteria of 80 per cent of turnover from the sectors mentioned in the latest notification, provided they fulfil the condition of average annual export earnings of Rs. 100 crores from these sectors in the previous three years.

The Government had earlier issued a number of guidelines pertaining to operational parameters and modalities for issue of ADR/GDR linked ESOPs by Indian software companies. Revisions and modifications to expand the scope of application to the Indian companies engaged in information technology software and information technology services were also issued subsequently.

Guidelines were also issued in March this year, liberalising norms for overseas business acquisition by Indian companies. Through these guidelines, the norms for acquisition of overseas companies was extended to information technology and entertainment software, pharmaceuticals, biotechnology and any other activity within the knowledge-based industry which the Government would notify from time to time.

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