Investment bankers managing the Standard Chartered IDR (Indian Depository Receipts) issue have sought clarity from the market regulator on the amount of margin payment by institutional investors.
While institutions investing in any issue opening on or after May 1 would have to pay 100 per cent money upfront, sources said the bankers wanted clarity on whether these norms would also apply to an issue of depository receipts. It is believed that the bankers have written to the Securities and Exchange Board of India (Sebi).
“We have written to Sebi for more clarity,” said a banker associated with the deal who did not wish to be named. “Since this is the first-ever IDR issue, there are some grey areas, one of which is related to the upfront payment by QIBs (qualified institutional buyers).”
London-based Standard Chartered PLC became the first entity to opt for an IDR issue when it filed its prospectus last week. These IDRs would have Standard Chartered’s shares listed on the London Stock Exchange as the underlying. According to the prospectus, half the issue has been reserved for QIBs, which need to pay “an amount representing at least 10 per cent of the bid amount... at the time of submission of their bids”.
“The prospectus was prepared before the new guidelines were announced and you need to ask Sebi what its stand is on this (QIB margin payment) issue,” said another banker associated with the deal. “In any case, the new norms have not been notified yet,” he added.
Sebi’s IDR guidelines detail the kind of companies that can list their depository receipts.
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They touch on issues related to profitability, market capitalisation and dividend payment, but leave the structure of the issue and payment requirements to the Issue of Capital and Disclosure Requirements Regulations (ICDR).
“IDRs are governed by ICDR and do not enjoy any waiver,” said a Sebi official. He, however, refused to comment on whether bankers representing Standard Chartered had applied for any waiver or clarification on institutional bidders’ margin requirements. “Logically, the guidelines for local issuances should apply to IDRs too,” said Prithvi Haldea of Prime Database. “Therefore, institutions will have to pay 100 per cent upfront margin at the time of applying if the issue opens on or after May 1,” he said. The structure of an IDR issue is siimilar to that of a domestic initial public offer and both have reservations for QIBs, non-institutional bidders and retail investors.
In a circular in June last year, the regulator clearly said the “model listing agreement shall be read in conjunction with the Companies (Issue of Indian Depository Receipts) Rules, 2004, and Chapter VIA of the Sebi (Disclosure & Investor Protection) Guidelines, 2000, or any statutory modification or re-enactment thereof.” The DIP guidelines were rescinded last year while the ICDR ones were being notified.