The Hindu Business Line : IDR norms made more attractive

To enable foreign companies to mobilise funds from Indian capital market the Government has made the guidelines for Indian Depositary Receipts (IDRs) by such companies less stringent.

IDRs are similar to ADRs and GDRs and are designed to enable foreign companies to raise equity funds from Indian market.

The Government has now introduced a net worth and market capitalisation ceiling as an eligibility condition for such issues instead of an earlier net worth and turnover-based cap. Besides, the condition requiring profit track record for at least preceding five years has also been relaxed. Under the new norm the issuer should have a track record of distributable profits for at least three of the preceding five years.

The limit for an overseas firm to raise money from India in a financial year has been raised from 15 per cent of its paid-up capital and free reserves to 25 per cent of the post-issue number of equity shares.

Speaking to Business Line, Mr Prem Chand Gupta, Minister for Corporate Affairs, said “IDR rules have been in existence for last few years. However, there were hardly any takers amongst the target group. Based on the feedback r eceived from those concerned including SEBI, we have brought in the changes in order to make it more attractive.”

The Government has also liberalised the auditing requirements to the extent that quarterly results will be subjected to limited reviews by the auditors of the issuing company and approved by its Board of Directors.