Mumbai: Capital market regulator Securities and Exchange Board of India, or Sebi, on Friday notified detailed guidelines allowing so-called two-way fungibility of Indian depository receipts, or IDRs.

This means IDRs can be converted into underlying equity shares, and the underlying shares can be converted into IDRs, within a certain headroom, said Sebi.

These instruments will be redeemable into underlying equity shares only after a year of their listing, it said.

While allowing fungibility, the IDR issuer has to allow investors to either convert the instruments into underlying shares or convert the IDRs directly into shares. The issuer will have to sell these in the foreign market where it is listed and distribute the sale proceeds to the IDR holders.

All IDR issuing companies have to offer fungibility of their IDRs at least once in a quarter and the window to do so will remain open for at least seven days. Moreover, at least 20% of the IDRs on redemption or conversion in the fungibility window will be for retail investors, Sebi said.

At present, Standard Chartered Plc is the only overseas entity to have listed IDRs. Sebi said existing issuers will provide the option of redemption in the next three months.

IDRs are rupee-denominated securities created by a domestic depository against the underlying shares of a foreign company. They enable overseas companies to raise funds from Indian investors.

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