Guidelines for Enabling Partial Two-Way Fungibility of Indian Depository Receipts (IDRs)

CIR/CFD/DIL/6/2013 · 2013-03-01 · SEBI

Summary

This circular establishes guidelines for enabling partial two-way fungibility of Indian Depository Receipts (IDRs) into underlying equity shares. It mandates that IDRs be convertible within a defined headroom, subject to specific timelines and procedural requirements for both future and existing issuances. The document also outlines cost disclosure norms, retail investor reservations, and the transition from previous regulatory frameworks.

Text

All the IDRs shall have partial two-way fungibility. The partial two-way fungibility means that the IDRs can be converted into underlying equity shares and the underlying equity shares can be converted into IDRs within the available headroom.

IDRs shall not be redeemable into underlying equity shares before the expiry of one year period from the date of listing of IDRs.

After completion of one year period from the date of listing of IDRs, the issuer shall, provide two-way fungibility of IDRs.

The issuer shall provide said fungibility to IDR holders in any of the following ways: a. converting IDRs into underlying shares; or b. converting IDRs into underlying shares and selling the underlying shares in the foreign market where the shares of the issuer are listed and providing the sale proceeds to the IDR holders; or c. both the above options may be provided to IDR holders.

All the IDRs that have been applied for fungibility by the holder shall be transferred to IDR redemption account at the time of application.

The Issuer may receive requests from the holders of underlying shares and convert these into IDRs subject to the Headroom available with respect to the number of IDRs originally issued subject to the guidelines prescribed by SEBI & Reserve Bank of India (“RBI”)

In case of option of converting the IDRs into underlying equity shares and providing the sale proceeds to the IDR holders is exercised, the issuer shall disclose the range of fixed/variable costs in percentage terms upfront and ensure that all the costs together shall not exceed 5% of the sale proceeds.

Available Headroom and significant conversion/ reconversion transactions shall be disclosed by the issuer on a continuous basis.

After completion of one year period from the date of issue of IDRs, the issuer shall, every year provide redemption/conversion of IDRs into underlying equity shares of the issuer of up to 25% of the IDRs originally issued.

The Issuer shall invite expression of interest from IDR holders by giving advertisements in leading English and Hindi national daily newspapers with wide circulation as well as notification to the stock exchanges giving the operating guidelines for redemption/ conversion of IDRs at least one month before the implementation.

The issuer shall provide the said fungibility to IDR holders in any of the following ways: a. converting IDRs into underlying shares; or b. converting IDRs into underlying shares and selling the underlying shares in the foreign market where the shares of the Issuer are listed and providing the sale proceeds to the IDR holders; or c. both the above options may be provided to IDR holders.

The periodicity for IDR fungibility shall be at least once every quarter. The fungibility window shall remain open for the period of at least seven days.

Source: SecMarx — Guidelines for Enabling Partial Two-Way Fungibility of Indian Depository Receipts (IDRs). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.