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Govt further liberalises norms for Euro issues

The government has made modifications in respect of European and American depository receipts issues, permitting unlisted companies to float such issues provided they fulfilled the three-year track record eligibility, besides withdrawing the 90-day validity period for final approval of global depository receipts and ADRs.

The modifications, done on the basis of the periodic review of comprehensive guidelines for euro issues, however, will continue with the provision for relaxation of the three-year track record requirement in case of companies seeking GDR, ADR, and foreign currency convertible bonds to finance investment in infrastructure industries such as power generation, telecommunications, petroleum and its exploration, refinery, port, airports and roads.

Unlisted companies floating GDR, ADR, FCCB issues would need to fulfil the requirement of standard listing on the domestic stock exchanges within three years of starting to make profit.

Previously, only listed companies were permitted to issue GDR, ADR and FCCB subject to fulfilment of the track record requirement of good performance (financial and otherwise) for a period of three years, the government said.

The specific modifications made for ADR and GDR included the withdrawal of the 90-day validity period for final approval for GDRs and ADRs.

The guidelines issued in June 1996 had provided that both in principle and final approval would be valid for 90 days from their respective dates of issue.

It has been decided to remove all end use restrictions on GDRs and ADRs. Unlike commercial borrowing of foreign currency convertible bonds carrying repayment liabilities on the company, GDRs and ADRs are full risk equity instruments, with no repayment liability on the issuing company.

However, the existing ban on investment of GDR and ADR issue proceeds in real estate and stock markets will continue, it said.

These modifications will be effective from the date of issue of these guidelines, the government added.

Cellular and basic telecom companies will be among the major beneficiaries from the relaxation in the guidelines. Promoters of these companies have been trying to float their shares on European and US markets for some time now.

The promoters claim that these markets give better value to telecom companies than the Indian markets.

UNI