A Source Of Raising Fund For Foreign Company

1497 WordsMar 20, 20176 Pages
IDRs: A Source of Raising Fund for Foreign Company in India Dr. Rakesh Kumar Manjhi Temp. Assistant Professor, Accounting & Financial Management, The M. S. University of Baroda, Vadodara, Gujarat, India. rakeshkumar741985@yahoo.com Introduction Investment in Indian Depository Receipts (IDRs) is an attracting investment avenue for the Indian investors who are keen to invest their funds in foreign company’s equity. Just like American Depository Receipts or Global Depository Receipts, which are instruments used by Indian Companies to raise money from foreign investors, IDRs are meant for foreign companies looking to raise capital in India from Indian investors. In 2010, Standard Chartered PLC issued IDRs successfully first time in…show more content…
Domestic depository then acknowledge about this to its country’s investors. This acknowledgement of deposited underlying equity shares with overseas depository against which depository receipts are issued to investors is known as Depository Receipts. The following diagram would be helpful to understand it: England India Indian Depository Receipts In the Indian domain, a Depository Receipt is reflected to as an Indian Depository Receipt. IDRs are transferable financial instruments listed on Indian stock exchanges in the form of depository receipts. Theoretically, the IDRs shall be issued by the Foreign Company, i.e., Company located outside India thinks of raising capital from the Indian arena through depository located outside India and an Indian depository participant. The last mile issuance of actual instrument is done by an Indian depository participant. The Indian depository participant will issue depository receipts to Indian investors against the underlying equity shares of the foreign company. Basic Requirements of Issuing Company for IDR Issue The issuing company cannot issue IDRs unless – a. Its pre-issue paid-up capital and free reserves are at least US$ 50 million and it has a minimum average market capitalization (during the last three years) in its parent country of at least US$ 100 million. b. Its pre-issue debt equity ratio is not more than 2:1. c. It has been listed and continuously
Open Document