Issue of Indian Depository Receipt (IDR)

Indian Depository Receipt is an instrument in the form of a depository receipt created by a Domestic Depository in India against the underlying equity shares of the issuing company incorporated outside India.

Conditions to be Satisfied for the Issue of IDR

The pre-issue paid-up capital and free reserves should be at least US $ 50 million.

Average turnover should be US $500 million during the 3 preceding years.

The company should have been making profit and declaring minimum 10% dividend for at least 3 out of 5 years preceding the issue.

The companies pre-issue debt equity rates should not exceed 2:1

The company should fulfill the eligibility criteria prescribed by SEBI

Issue size: the size of an IDR issue should not be less than ` 50 crore

Ceiling: In any financial year the ceiling on IDR by a company shall be 15% of paid-up capital & reserves. The denomination should be in Indian Rupees.

Issue Procedure of IDR

To raise funds in India by issuing IDR, prior approval from SEBI should be obtained. The company should apply for permission at least 90 days before the opening of the issue. The fee payable with application is $10,000 US which is non-refundable.

For issue size upto ` 100 crore - 0.5% subject to min of ` 10 lakh

For issue size value exceeding ` 100 crore - additional 0.25% of the issue value

The issuer must obtain necessary approval from the appropriate authority from the country of its incorporation.

The issuer should appoint an overseas custodian bank, a domestic

depository and merchant banker for the issue of IDR.

The issuer should deliver the underlying equity shares to the overseas custodian bank.

The overseas custodian bank authorizes the domestic depository to issue IDR.

The issuer should file the following with the ROC and SEBI

Due diligence report

Prospectus certified by two authorized signatories

The above should be filed through a merchant banker or domestic depository.

Listing of IDR

The IDR should be listed on a recognized stock exchange. They can be purchased/possessed/freely transferred by a person resident in India.

Redemption

A holder of IDR may ask the domestic depository to redeem the IDR. The domestic depository would request the OCB to get the corresponding underlying shares in favour of the holder for the purpose of being sold.