Sebi pens guidelines for IDRs

The Securities and Exchange Board of India (Sebi) today laid down guidelines to be followed by foreign companies to raise money from the Indian capital markets.

The provisions include such clauses as the status of a public company in their home country, a "good track record" in the home country and the absence of any prohibition on their issuing such securities by any regulatory body anywhere in the world.

The new guidelines also specify the eligible investors for such issues. Only qualified institutional investors can apply to such issues, which have to have a minimum size of Rs 50 crore and carry a minimum application amount of Rs 2 lakh. The issuing company will not be allowed to automatically use the proceeds for purposes other than those given in the prospectus.

If the company issuing the Indian depositary receipts (IDRs) does not receive the minimum subscription of 90 per cent of the issued amount on the date of closure of the issue, or if the subscription level falls below 90 per cent after the closure of issue on account of cheques having being returned unpaid or withdrawal of applications, the company shall forthwith refund the entire subscription amount received.

If there is a delay beyond eight days after the company becomes liable to pay the amount, the company shall pay interest at the rate of 15 per cent per annum for the period of delay.