From now on foreign companies would be able to raise money from the Indian stock markets via Indian Depository Receipts (IDRs).
The green signal to this effect has been given by the Reserve Bank of India (RBI).
Through a recent notification the IDRs rule has been implemented with immediate effect. The move would now allow foreign companies to issue IDRs through a domestic depository and also lets them to purchase, possess, transfer and redeem IDRs.
The central bank has also said that those persons residing in India would neither have to bother about Foreign Exchange Management Act (FEMA) regulations for investing in IDRs nor the transfer arising on transactions on a recognized stock exchange.
Meanwhile, it would be mandatory to get permission from RBI or IRDA for financial or banking companies who have a presence in India either through an office or any other subsidiary before issuing IDRs.
The concept of IDRs is similar to the more well-known American Depository Receipts (ADRs) or the Global Depository Receipts (GDRs), which allow Indian and other countries’ companies to raise money in the US and elsewhere.
Foreign institutional investors (FIIs), including market regulator Securities and Exchange Board of India (SEBI) approved sub-accounts of FIIs and non-resident Indians can also invest, purchase, hold and transfer IDRs from now on.
The IDRs will, however, not be redeemable into underlying equity shares before the expiry of one year period from the date of issue of the IDRs.
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