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Foreign firms eye IDR route to raise resources

Foreign firms eye IDR route to raise resources
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First Published: Fri, Apr 24 2009. 11 02 PM IST

 Local move: Standard Chartered is mulling an India share sale. David Butow / Bloomberg
Local move: Standard Chartered is mulling an India share sale. David Butow / Bloomberg
Updated: Fri, Apr 24 2009. 11 02 PM IST
New Delhi: Several foreign financial sector firms and power generating utilities are exploring the possibility of raising funds through an Indian listing, a senior government official said.
Local move: Standard Chartered is mulling an India share sale. David Butow / Bloomberg
The proposed big-ticket $1 billion (Rs4,990 crore) Indian listing by Standard Chartered Plc., the largest foreign bank in India, will be a precursor to these issues, he added.
Companies from the US, the UK, South Africa and Nepal are interested in the Indian primary market through an Indian Depository Receipt (IDR) issue, the official said, who declined being named.
Many hydropower firms from Nepal sell electricity to India.
IDRs are derivative instruments that allow foreign firms to raise resources in India. These are listed and traded on domestic exchanges like shares.
The process of issuing an IDR is like public offers of equity. India allowed foreign firms to issue IDRs in 2004.
However, not a single IDR issue has happened so far due to lack of interest and clarity on the tax treatment of the instrument.
“The Income-tax Act, 1961, needs to be amended and clarity on the definition is expected in the next budget,” the official said.
“We have been informally encouraging companies to issue IDRs. There is a considerable interest and once the IT Act is amended, Indian stock exchanges will aggressively market IDRs,” he added.
cnbctv18@livemint.com
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First Published: Fri, Apr 24 2009. 11 02 PM IST