First StanChart IDR - A Report Card

By Sangeeta Lakhi

  • 12 Jun 2010

Sharing is caring. Reciprocate. We have heard this time and again and it is so true. India saw its first Indian Depositary Receipt issued and listed on the Indian stock exchange today.

Depository Receipts or DRs, as they are more popularly known, have been around for some time now. The most common of DRs are ADRs and GDRs.  Over a period of time, severa, countries have also developed their DRs, such as Brazil DR (BDR) or Japan DR (JDR) or Germany DR (FDR), DR's are a popular instrument with companies desirous of raising money.

Indian companies have been, since 2002-03, issuing Global Depositary Receipts to overseas investors and have raised substantial monies from time to time. Till yesterday, companies in India were in awe of companies listed overseas and wanted to take their companies overseas as well, whether they be on LuxSE, SGX, AIM or LSE.


It was a pleasant surprise when Standard Chartered Bank, a British bank announced that it would raise money in the Indian market by issue of Indian depositary receipts (IDR), the first issue in India, after the IDR guidelines were announced.

With pride, we can now say that India is now no more a third world country, but a part of an elite group of countries boasting of investor confidence. Now we share the floor space on our stock exchanges with other overseas companies and we not only share reciprocating treaties with other countries, but other countries reciprocate when Indian companies list their securities overseas.

The issue of IDRs by Standard Chartered Bank was subscribed two (2) times over and they raised a substantial sum of money from the Indian market, what with the fact that over 10 million depository receipts changed hands in the first two and a half hours of trade alone.


It is a paradox that at the time SCB was raising IDRs in India (valued at nearly half-a-billion dollars), an overseas company forming part of a large Indian group was raising nearly 2 billion dollars) in London.

Standard Chartered PLC (the "Company") issued 24 crores (240 million) Indian Depository Receipts at the price of Rs. 104 per equity share in accordance with SEBI Regulations, through a 100% book building method, resulting in collection of about Rs 2,496 crores (Rs.24.96 billion).

No doubt that this pilot venture has suffered a few hiccups, such as the subscription by the retail investors was not very encouraging and the employees did not show much eagerness. The marketing campaign could not sustain the hype surrounding the first IDR Issue, which was perceived to be a stepping stone for India to become a global financial centre.


It is still to be seen whether the 'first mover' advantage helps the company, to form a bond with India and also add to its global brand value. The listing of Indian companies on the NASDAQ has helped increase their brand recognition in the USA which was the pre-cursor to them being branded as global players.  Considering the importance of India as a market in the new world economy a  company will need to have a strong presence in India and a strong connect with the people of India to be considered 'truly global'. 

Since this is the first step of a well settled multi national bank venturing onto Indian shores seeking Indian investors, the response to this issue and the investor interest on the trading floor will play a crucial role in whetting further financial appetite amongst other multinational companies desirous of taking this route to access capital from India.

There are always advantages (and disadvantages) of being first. The IDR issue was in the making for some time and was launched when the Sensex was not in its best form. We are certain that there will be many more IDRs issued in India and they will learn from the shortcomings of the first IDR issue and tread carefully to perfection.


By - Sangeeta Lakhi & Tomu Francis, Rajani Associates. Rajani Associates is a full fledged law firm with capital markets being one of its forte. The Firm has handled close to 100 GDRs, FCCBs and QIP issues.

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