Redemption of Indian Depository Receipts (IDRs) into Underlying Equity Shares
Summary
This circular establishes the regulatory framework for the redemption of Indian Depository Receipts (IDRs) into underlying equity shares after a mandatory one-year lock-in period. It permits redemption only when IDRs are deemed 'infrequently traded,' defined as having an annualized trading turnover of less than five percent over the preceding six months. The issuer must conduct half-yearly liquidity tests, announce triggers publicly within seven days, and complete redemptions within thirty days of application receipt.
Text
IDRs are not redeemable into underlying equity shares before the expiry of a one-year period from the date of issue... fungibility of IDRs into the underlying Shares would be permitted only after the expiry of the one year period... and subsequent to obtaining RBI approval on a case-by-case basis.
A holder of IDRs may transfer the IDRs or may ask the Domestic Depository to redeem these IDRs, subject to the provisions of the Foreign Exchange Management Act, 1999 and other laws for the time being in force.
After the completion of one year from the date of issuance of IDRs, redemption of the IDRs shall be permitted only if the IDRs are infrequently traded on the stock exchange(s) in India.
For this purpose, IDRs shall be deemed to be “infrequently traded” if the annualized trading turnover in IDRs during the six calendar months immediately preceding the month of redemption is less than five percent of the listed IDRs.
The issuer company shall test the frequency of trading of IDRs on a half yearly basis ending on June and December of every year.
When the IDRs are considered “infrequently traded” on the above basis, it shall be the trigger event for redemption.
The issuer company shall make a public announcement... as well as notify the stock exchanges. Such announcement shall be made within seven days of closure of the half year ending on which the liquidity criteria is tested.
The IDR holders may submit their application to the domestic depository for redemption of IDRs within a period of thirty days from the date of such public announcement.
The redemption of IDRs shall be completed within a period of thirty days from the date of receipt of application for redemption.
Pursuant to such redemption, the domestic depository shall notify the revised shareholding pattern of the issuer company to the concerned stock exchanges within seven days of completion of the process of redemption.
All intermediaries are directed to comply with the instructions contained in this circular.
This circular is issued in exercise of the powers conferred under Section 11 read with Section 11A of the Securities and Exchange Board of India Act, 1992.
Source: SecMarx — Redemption of Indian Depository Receipts (IDRs) into Underlying Equity Shares. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.