Background:
- A depository receipt is a foreign currency denominated instrument, listed on an international exchange, issued by a foreign depository to a domestic custodian and includes global depository receipts (GDRs).
- The framework comes after Finance Minister Nirmala Sitharaman in August said that the markets regulator would soon implement the Depository Receipt Scheme 2014. The liberalised norms for DRs were issued in 2014 but could not be implemented due to concerns raised by Sebi.
- This will give Indian companies increased access to foreign funds through American Depository Receipt (ADR)/ Global Depository Receipt (GDR).
Key highlights of the framework:
- SEBI has not allowed unlisted companies to issue DRs. However, companies can do a simultaneous issuance, provided the allotment and listing in the domestic market takes places first.
- DR issuances can take place only on the recognised global exchanges. The move is aimed at excluding smaller platforms, which in the past have been prone to manipulation.
- It has also barred domestic residents as, well as, non-resident Indian (NRIs) from investing in the DRs issued by an Indian company.
- Also, the equity issued under the DR programme will not be considered as public shareholding for the purpose of computing the 25 per cent minimum public float mandatory for listed companies.
- The pricing of the DR issued in the overseas markets cannot be less than the price in the domestic markets.
- DRs will be included for calculating the foreign shareholding in the company and will have to adhere to the caps imposed.
