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WHAT DOES GLOBAL DEPOSITARY RECEIPT - GDR MEAN?
1. A bank certificate issued in more than one country for shares in a foreign
company. The shares are held by a foreign branch of an international bank. The
shares trade as domestic shares, but are offered for sale globally through the
various bank branches.
2. A financial instrument used by private markets to raise capital denominated
in either U.S. dollars or euros.
HISTORY:
The concept of DRs has been in use since 1927 in Western capital markets.
Originally, they were designed as instruments to enable US investors, to trade in
securities which were not listed on US stock exchange in form of American
depository receipts (ADRs)
Until 1983, the market for DRs was largely investor driven and depositary
banks often issued DRs without the consent of the company concerned.
However 1983, the SEC made it mandatory for the companies to provide certain
information in this regard.
Initially till 190 companies had to issue separate receipts in US and Europe in
form of ADR & IDR respectively.
But in 1990 amendments in Rule 144A & regulation ‘S’ of SEC permitted
companies to raise capital without having to register the securities with SEC or
without making changes in financial statements so as to reflect US accounting
principles.
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The first GDR was developed for Samsung Co. Ltd. a Korean trading company,
in December 1990. The GDR enabled the company to raise capital in US &
Europe through one security issue simultaneously in both markets. By the end
of June 1992, 29 placement utilized GDRs accounting for over US $ 4 billion of
capital raised.
GLOBAL DEPOSITORY RECEIPTS(GDR )
Foreign Investment through ADRs/GDRs, is treated as Foreign Direct
Investment. Indian companies are allowed to raise equity capital in the
international market through the issue of GDR/ADRs. These are not subject to
any ceilings on investment. An applicant company seeking Government's
approval in this regard should have a consistent track record for good
performance (financial or otherwise) for a minimum period of 3 years. This
condition can be relaxed for infrastructure projects such as power generation,
telecommunication, petroleum exploration and refining, ports, airports and
roads.
There is no restriction on the number of GDRs/ADRs to be floated by a
company or a group of companies in a financial year. There is no such
restriction because a company engaged in the manufacture of items covered
under Automatic Route is likely to exceed the percentage limits under
Automatic Route, whose direct foreign investment after proposed GDRs/ADRs
is likely to exceed 50 per cent/51 per cent/74 per cent as the case may be. There
are no end-use restrictions on GDRs/ADRs issue proceeds, except for an
express ban on investment in real estate and stock markets
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SALIENT FEATURES OF GDRS/ADRS
The Ministry of Finance, Government of India, brings out guidelines, from time
to time, for Euro issues, i.e., issue of ADR/GDR by Indian companies. The
Issuer of GDR/ADR is governed by the provisions of the issue of Foreign
Currency Convertible Bonds and Ordinary shares (through Depository Receipt
Mechanism) Scheme, 1993 and the guidelines issued by the Central
Government from time to time (the "Scheme"):
Indian companies raising money through GDRs through registered exchanges
are free to access the GDR markets through an automatic route without the prior
approval of the Ministry of Finance, Department of Economic Affairs. Private
placement of GDRs is also eligible for the automatic approval provided the
issue is lead managed by an Investment Banker (i.e. registered with the
Securities and Exchange Commission in the United States of America, or under
Financial Services Act in United Kingdom or the appropriate regulatory
authority in Europe, Singapore or in Japan). The track record condition is not
operative for GDR issues.
The ADR/GDR issue for the purpose of acquisition is backed by
underlying fresh equity shares issued by the Issuer.
The total holding in the Issuer by persons resident outside India in the
expanded capital base, after the ADR/GDR issue does not exceed the
sectoral cap prescribed under the relevant regulations for such
investment.
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Issue structure shall be finalised in consultation with the Lead Manager to
the issue.
Pricing of ADRs/GDRs to be issued to a person resident outside India
may be decided by the Indian company, where the issue is on public offer
basis, in consultation with the Lead Manager to the issue and in all other
cases the price shall be worked out in accordance with the SEBI
Guidelines, as applicable.
A GDR may be issued in any negotiable form and may also be listed on
any international stock exchanges for trading outside India.
There is no lock-in period for the GDR issue under the Scheme.
The GDR holders are given the option to cancel the GDRs with the
Depositary and to sell the underlying Shares. Purchasers of these Shares
are also given the option to convert the Shares so released back into
GDRs for purchase. In India, two-way fungibility is permitted and the
GDRs are freely convertible into Shares and back into GDRs without
restriction to the extent of the original issue size. As per the operative
guidelines for the limited two-way fungibility issued by the Reserve Bank
of India (“RBI”) on February 13, 2002, reissuance of GDRs would be
permitted to the extent of GDRs, which have been redeemed into
underlying shares, and sold in the domestic market.
The Indian company issuing shares through ADR/GDR route, shall
furnish to the Reserve Bank, full details of such issue in the prescribed
form, within thirty (30) days from the date of closing of the issue.
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The Indian company issuing shares against ADR/GDR shall furnish a
quarterly return in the prescribed form to the Reserve Bank within fifteen
(15) days of the close of the calendar quarter.
The issue related expenses (covering both fixed expenses like under
writing commissions, lead managers charges, legal expenses and other
reimbursable expenses) shall be subject to a ceiling of 4% in the case of
GDRs and 7% in the case of ADRs. Issue expenses beyond the said
ceiling would need prior approval of the Reserve Bank.
Indian companies are permitted to retain funds raised abroad through
ADRs/GDRs for any period to meet their future forex requirements.
In terms of Foreign Currency Convertible Bonds and Ordinary Shares
(Through Depository Receipts Mechanism) Scheme, 1993, the issuer
company is required to obtain RBI approval for overseas
investment/business acquisitions (where GDR proceeds are to be utilised
for overseas investment) prior to the GDR issue.
No detailed end uses are specified, however the FCCB proceeds cannot
be used for investing in stock markets and real estate.
An Indian company, which is not eligible to raise funds from the Indian
Capital Market including a company which has been restrained from
accessing the securities market by the Securities and Exchange Board of
5 | P a g e
India (SEBI) will not be eligible to issue (i) Foreign Currency
Convertible Bonds and (ii) Ordinary Shares through Global Depositary
Receipts under the Foreign Currency Convertible Bonds and Ordinary
Shares (Through Depositary Receipt Mechanism) Scheme, 1993.
COMPARISON BETWEEN ADRS AND GDRS
ADR GDR
Centre:
The NYSE is the largest stock
exchange in the world by both value
and turnover, foreign equities play a
minor role.
The LSE is not as large as the NYSE
overall, but is the global centre for
international equities, which dominate
in turnover.
Instrument:
No legal or technical difference
between an ADR and a GDR. The US
has three levels of ADR programme
Unlike the NYSE, the LSE makes no
demands requiring companies to give
holders the right to vote.
Disclosure:
Comprehensive disclosure required for
F-1, the US prospective which must
accompany a public offering
Detailed Information required on the
company, but less onerous for GDR
listing than full equity.
GAAP:
Foreign companies listing in the US
must reconcile their accounts to US
GAAP
LSE satisfied with a statement of the
difference between the UK and Indian
Accounting Standards.
Cost:
US listing could be expensive. Total
initial costs likely to be in the range of
GDR listing on the LSE is
comparatively inexpensive. Initial
costs likely to be in the range US $
6 | P a g e
US $ 10,00,000 to US $ 20,00,000. 2,00,000 to US $ 4,00,000.
Retail/QIB:
ADR can be sold to QIB and General
Public/Retail.
GDR can be sold only to QIB’s
Liability:
Legal liability of both a company and
its individual directors increased by a
full US listing.
Legal Liability of a company and its
directors is less than in the case of an
ADR.
Two different GDR structures
When GDRs are structured with a Rule 144(a) offering for the US and a
"Regulation S" offering for non-US investors, there are two possible options for
the structure.
Unitary Structures
Under a unitary structure, a single class of DRs is offered both to QIBs in the
US and to offshore purchasers outside the issuer's domestic market, in
accordance with Regulation S. All DRs are governed by one Deposit Agreement
and all are subject to deposit, Withdrawal and resale restrictions.
Bifurcated Structure
Under a bifurcated structure, Rule 144(a) ADRs are offered to QIBs in the US
and Regulation S DRs are offered to offshore investors outside the issuer's
domestic market. The two classes of DRs are offered using two separate DR
facilities and two separate Deposit Agreements.
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The Regulation S DRs are not restricted securities, and can therefore be
deposited into a "side-by-side" Level I DR program, and are not normally
subject to restrictions on deposits, withdrawals or transfers. However, they may
be subject to temporary resale restrictions in the US.
BENEFITS OF GDR:
The increasing demand for Depositary Receipts is driven by the desire of
individual and institutional investors to diversify their portfolios, reduce risk
and invest internationally in the most efficient manner possible. While most
investors recognize the benefits of global diversification, they also understand
the challenges presented when investing directly in local trading markets. These
obstacles can include inefficient trade settlements, uncertain custody services
and costly currency conversions. Depositary Receipts overcome many of the
inherent operational and custodial hurdles of international investing. In fact,
cost benefits and conveniences may be realized through Depositary Receipt
investing, thus allowing those who invest internationally to achieve the benefits
of global diversification without the added expense and complexities of
investing directly in the local trading markets.
Benefits to a Company
Currently, there are over 2,000 Depositary Receipt programs for companies
from over 70 countries. The establishment of a Depositary Receipt program
offers numerous advantages to non-U.S.companies. The primary reasons to
establish a Depositary Receipt program can be divided into two broad
considerations: capital and commercial.
8 | P a g e
Advantages may include:
Expanded market share through broadened and more diversified investor
exposure with potentially greater liquidity, which may increase or
stabilize the share price.
Enhanced visibility and image for the company's products, services and
financial instruments in a marketplace outside its home country.
Flexible mechanism for raising capital and a vehicle or currency for
mergers and acquisitions.
Enables employees of U.S. subsidiaries of non-U.S. companies to invest
more easily in the parent company.
Benefits to an Investor
Increasingly, investors aim to diversify their portfolios internationally.
However, obstacles such as undependable settlements, costly currency
conversions, unreliable custody services, poor information flow, unfamiliar
market practices, confusing tax conventions and internal investment policy may
discourage institutions and private investors from venturing outside their local
market.
Depositary Receipt advantages may include:
Quotation in U.S. dollars and payment of dividends or interest in U.S.
dollars.
Diversification without many of the obstacles that mutual funds, pension
funds and other institutions may have in purchasing and holding
securities outside of their local market.
Elimination of global custodian safekeeping charges, potentially saving
Depositary Receipt investors up to 10 to 40 basis points annually.
9 | P a g e
Familiar trade, clearance and settlement procedures.
Competitive U.S. dollar/foreign exchange rate conversions for dividends
and other cash distributions.
Ability to acquire the underlying securities directly upon cancellation.
ISSUE OF SHARES BY INDIAN COMPANIES UNDER ADR / GDR
i) Depository Receipts (DRs) are negotiable securities issued outside India by a
Depository bank, on behalf of an Indian company, which represent the local
Rupee denominated equity shares of the company held as deposit by a
Custodian bank in India. DRs are traded on Stock Exchanges in the US,
Singapore, Luxembourg, etc. DRs listed and traded in the US markets are
known as American Depository Receipts (ADRs) and those listed and traded
elsewhere are known as Global Depository Receipts (GDRs). In the Indian
context, DRs are treated as FDI.
ii) Indian companies can raise foreign currency resources abroad through the
issue of ADRs/GDRs, in accordance with the Scheme for issue of Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt
Mechanism) Scheme, 1993 and guidelines issued by the Government of India
there under from time to time.
iii) A company can issue ADRs / GDRs if it is eligible to issue shares to persons
resident outside India under the FDI Scheme. However, an Indian listed
company, which is not eligible to raise funds from the Indian Capital Market
including a company which has been restrained from accessing the securities
market by the Securities and Exchange Board of India (SEBI) will not be
eligible to issue ADRs/GDRs.
10 | P a g e
iv) Unlisted companies, which have not yet accessed the ADR/GDR route for
raising capital in the international market, would require prior or simultaneous
listing in the domestic market, while seeking to issue such overseas instruments.
Unlisted companies, which have already issued ADRs/GDRs in the
international market, have to list in the domestic market on making profit or
within three years of such issue of ADRs/GDRs, whichever is earlier.
ADRs / GDRs are issued on the basis of the ratio worked out by the Indian
company in consultation with the Lead Manager to the issue. The proceeds so
raised have to be kept abroad till actually required in India. Pending repatriation
or utilisation of the proceeds, the Indian company can invest the funds in:-
a. Deposits with or Certificate of Deposit or other instruments offered by banks
who have been rated by Standard and Poor, Fitch, IBCA or Moody's, etc. and
such rating not being less than the rating stipulated by Reserve Bank from time
to time for the purpose;
b. Deposits with branches of Indian Authorised Dealers outside India; and
c. Treasury bills and other monetary instruments with a maturity or unexpired
maturity of one year or less.
v) There are no end-use restrictions except for a ban on deployment /
investment of such funds in real estate or the stock market. There is no
monetary limit up to which an Indian company can raise ADRs / GDRs.
vi) The ADR / GDR proceeds can be utilized for first stage acquisition of
shares in the disinvestment process of Public Sector Undertakings / Enterprises
and also in the mandatory second stage offer to the public in view of their
strategic importance.
11 | P a g e
vii) Voting rights on shares issued under the Scheme shall be as per the
provisions of Companies Act, 1956 and in a manner in which restrictions on
voting rights imposed on ADR/GDR issues shall be consistent with the
Company Law provisions. Voting rights in the case of banking companies will
continue to be in terms of the provisions of the Banking Regulation Act, 1949
and the instructions issued by the Reserve Bank from time to time, as applicable
to all shareholders exercising voting rights.
viii) Erstwhile OCBs who are not eligible to invest in India and entities
prohibited to buy, sell or deal in securities by SEBI will not be eligible to
subscribe to ADRs / GDRs issued by Indian companies.
ix) The pricing of ADR / GDR issues should be made at a price determined
under the provisions of the Scheme of issue of Foreign Currency Convertible
Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme,
1993 and guidelines issued by the Government of India and directions issued by
the Reserve Bank, from time to time.
x) The pricing of sponsored ADRs/GDRs would be determined under the
provisions of the Scheme of issue of Foreign Currency Convertible Bonds and
Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and
guidelines issued by the Government of India and directions issued by the
Reserve Bank, from time to time.
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SPONSORED ADR/GDR ISSUE
An Indian company can also sponsor an issue of ADR / GDR. Under this
mechanism, the company offers its resident shareholders a choice to submit
their shares back to the company so that on the basis of such shares, ADRs /
GDRs can be issued abroad. The proceeds of the ADR / GDR issue is remitted
back to India and distributed among the resident investors who had offered their
Rupee denominated shares for conversion. These proceeds can be kept in
Resident Foreign Currency (Domestic) accounts in India by the resident
shareholders who have tendered such shares for conversion into ADRs / GDRs.
New sponsored DRs by exchange, 2007
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Annual DR trading via the International Order Book
Total sponsored DRs
14 | P a g e
Total sponsored DRs by country, 2007
15 | P a g e
GDR MARKET
As derivatives, depositary receipts can be created or canceled depending on
supply and demand. When shares are created, more corporate stock of the issuer
is purchased and placed in the custodian bank in the account of the depositary
bank, which then issues new GDRs based on the newly acquired shares. When
shares are canceled, the investor turns in the shares to the depositary bank,
which then cancels the GDRs and instructs the custodian bank to transfer the
shares to the GDR investor. The ability to create or cancel depositary shares
keeps the depositary share price in line with the corporate stock price, since any
differences will be eliminated through arbitrage.
The price of a GDR primarily depends on its depositary ratio (aka DR ratio),
which is the number of GDRs to the underlying shares, which can range widely
depending on how the GDR is priced in relation to the underlying shares; 1
GDR may represent an ownership interest in many shares of corporate stock or
fractional shares, depending on whether the GDR is priced higher or lower than
corporate shares.
Most GDRs are priced so that they are competitive with shares of like
companies trading on the same exchanges as the GDRs. Typically, GDR prices
range from $7 - $20. If the GDR price moves too far from the optimum range,
more GDRs will either be created or canceled to bring the GDR price back
within the optimum range determined by the depositary bank.
Hence, more GDRs will be created to meet increasing demand or more will be
canceled if demand is lacking or the price of the underlying company shares
rises significantly.
16 | P a g e
Most of the factors governing GDR prices are the same that affects stocks:
company fundamentals and track record, relative valuations and analysts’
recommendations, and market conditions. The international status of the
company is also a major factor.
On most exchanges GDRs trade just like stocks, and also have a T+3 settlement
time in most jurisdictions, where a trade must be settled in 3 business days of
the trading exchange.
The exchanges on which the GDR trades are chosen by the company. Currently,
the stock exchanges trading GDRs are the:
1. London Stock Exchange,
2. Luxembourg Stock Exchange,
3. Dubai International Financial Exchange (DIFX),
4. Singapore Stock Exchange,
5. Hong Kong Stock Exchange.
Companies choose a particular exchange because it feels the investors of the
exchange’s country know the company better, because the country has a larger
investor base for international issues, or because the company’s peers are
represented on the exchange.
Most GDRs trade on the London or Luxembourg exchanges because they were
the 1st to list GDRs and because it is cheaper and faster to issue a GDR for those
exchanges.
Many GDR issuers also issue privately placed ADRs to tap institutional
investors in the United States. The market for a GDR program is broadened by
including a 144A private placement offering to Qualified Institutional Investors
17 | P a g e
in the United States. An offering based on SEC Rule 144A eliminates the need
to register the offering under United States security laws, thus saving both time
and expense. However, a 144A offering must, under Rule 12g3-2(b), provide a
home country disclosure in English to the SEC or the information must be
posted on the company’s website.
REPORTING OF ADR/GDR ISSUES
The Indian company issuing ADRs / GDRs has to furnish to the Reserve Bank,
full details of such issue in the Form enclosed in Annex -10, within 30 days
from the date of closing of the issue.
The company should also furnish a quarterly return in the Form enclosed in
Annex - 11, to the Reserve Bank within 15 days of the close of the calendar
quarter. The quarterly return has to be submitted till the entire amount raised
through ADR/GDR mechanism is either repatriated to India or utilized abroad
as per the extant Reserve Bank guidelines.
The government has allowed unlisted Indian companies, which have earlier
done an ADR or GDR issue, to undertake sponsored issues without getting
listed for some time.
The government had earlier banned companies not listed in India from listing
overseas, and directed those listed on foreign markets to list in India.
Unlisted companies that have not issued FCCBs, ADRs/GDRs prior to August
31, 2005, would require prior or simultaneous listing on the domestic stock
exchanges for issuing FCCBs, ADRs/GDRs, or sponsoring such issues against
existing shares under the scheme.
18 | P a g e
An official release said unlisted companies that had issued FCCBs, ADRs or
GDRs before August 31, 2005, and were not making profits would be permitted
to sponsor issues against existing shares held by its shareholders.
Such companies would be permitted to comply with listing conditions on
domestic stock exchanges within three years of their starting to make profits.
The permission to companies not listed in India to float sponsored issues
overseas could a provision of an exit route to venture capital and private equity
investors in such companies.
TWO-WAY FUNGIBILTY SCHEME
A limited two-way Fungibility scheme has been put in place by the Government
of India for ADRs / GDRs. Under this Scheme, a stock broker in India,
registered with SEBI, can purchase shares of an Indian company from the
market for conversion into ADRs/GDRs based on instructions received from
overseas investors. Re-issuance of ADRs / GDRs would be permitted to the
extent of ADRs / GDRs which have been redeemed into underlying shares and
sold in the Indian market.
Two-way fungibility of ADRs/GDRs issued by Indian Companies was
permitted by the Government of India and the RBI. The RBI has now, vide
APDIR Circular No: 21 dated February 13th 2002, issued operative guidelines
for the 2 way fungibility of ADR / GDR.
Earlier, once a company issued ADR / GDR, and if the holder wanted to obtain
the underlying equity shares of the Indian Company, then, such ADR / GDR
19 | P a g e
would be converted into shares of the Indian Company. Once such conversion
took place, it was not possible to reconvert the equity shares into ADR / GDR.
The present rules of the RBI make such reconversion possible, to the extent of
ADR / GDR which have been converted into equity shares and sold in the local
market. This would take place in the following manner:
Stock Brokers in India have been authorized to purchase shares of Indian
Companies for reconversion
The Domestic Custodian would coordinate with the Overseas Depository
and the Indian Company to verify the quantum of reconversion which is
possible and also to ensure that the sectoral cap is not breached.
The Domestic Custodian would then inform the Overseas Depository to
issue ADR / GDR to the overseas Investor.
Re-issue of ADRs/GDRs would be permitted to the extent of ADRs/GDRs that
have been redeemed and the underlying shares sold in the domestic market.
Two-way fungibility implies that an investor who holds ADRs/GDRs can
cancel them with the depository and sell the underlying shares in the market.
The company can then issue fresh ADRs to the extent of shares cancelled.
No specific permission of the RBI will be required for the re-conversion.
Besides, investments under foreign currency convertible bonds and ordinary
shares will be treated as direct foreign investment.
Accordingly, the re-conversion of shares into ADRs/GDRs will be distinct
from portfolio investments by foreign institutional investors (FIIs). The RBI
guidelines state that the transactions will be demand-driven and would not
require company involvement or fresh permissions.
20 | P a g e
The custodian would monitor the re-issuance of ADRs/GDRs within the
sectoral cap fixed by the Government. Each purchase transaction will be only
against delivery and payment received in foreign exchange through banking
channels. For this purpose, all SEBI registered brokers will be able to act as
intermediaries in the two-way fungibility of ADRs/GDRs.
BENEFITS OF FUNGIBILITY
The key benefits that could accrue to investors (ADR/GDR holders and
domestic investors) and companies from two-way fungibility are: improvement
in liquidity and elimination of arbitrage.
The conventional definition of liquidity is the ease with which an asset (in this
case, ADRs/GDRs) can be bought or sold quickly with relatively small price
changes. This essentially means that a liquid market for a security must have
depth and breadth, and aid speedy price discovery. A liquid market is said to
have depth if buy and sell orders exist both above and below the prices (at
which a stock or ADR/GDR) is transacting. Similarly, the market is said to have
breadth if buy and sell orders exist in good volume.
In the one-way fungible regime, ADRs/GDRs suffered from price volatility and
liquidity problems, basically for two reasons. The first reason was the low ADR
issue size that accounted for low free-float in the US market and, thereby, low
trading volumes in the security.
Second, the GDR market had been largely dormant (with the exception of a few
high-profile stocks) for the past couple of years. This affected the depth, breadth
21 | P a g e
and price-discovery process of GDRs in these markets. Two-way fungibility
may at least revive some market interest in these stocks.
REDUCTION/ELIMINATION OF ARBITRAGE
In an efficient market, two assets with identical attributes must sell for the same
price, and so should an identical asset trading in two different markets. If the
prices of such an asset differ, a profitable opportunity arises to sell the asset
where it is overpriced and buy it back where it is under priced. Obviously,
arbitrageurs (speculators aiming to exploit these riskless opportunities) can step
in and exploit this profit opportunity.
Under the one-way fungibility regime, though identical assets (namely stocks in
the domestic market and ADRs/GDRs in the overseas markets) traded at
different prices (at a discount/premium), the arbitrage opportunities went a
begging because of restrictions on the capital account. By introducing two-way
fungibility, market forces may trigger a realignment of prices, minimising the
widely divergent premium/discount levels prevailing between ADR/GDR prices
and the domestic stock prices.
22 | P a g e
EURO ISSUES BY INDIAN COMPANIES
Earlier, Indian Companies required approval of the Government of India before
issue of Foreign Currency Convertible Bonds (FCCBs). The RBI, has vide
FEMA Notification No : 55 dated March 7th 2002, liberalised these rules.
Accordingly:
Indian Companies seeking to raise FCCBs are permitted to raise them under
the Automatic Route upto US 50 Million Dollars per financial year without any
approval.
The FCCBs raised shall be subject to the sectoral limits* prescribed by the
Government of India.
Maturity period for the FCCBs shall be at least 5 years and the "all in cost"
at least 100 basis points less than that prescribed for External Commercial
Borrowings.
Some restrictions had been imposed previously on the number of issues that
could be floated by an individual company or a group of companies during a
financial year. There will henceforth be no restrictions on the number of
Euro-Issues to be floated by a company or a group of companies in a
financial year.
GDR end-users will include:
Financing capital goods imports;
Capital expenditure including domestic purchase/installation of plant,
equipment and buildings and investments in software development;
Prepayment or scheduled repayment of earlier external borrowings;
Investments abroad where these have been approved by competent
authorities;
23 | P a g e
Equity investment in JVs/WOSs in India. However, investments in stock
markets and real estate will not be permitted. Up to a maximum of 25 per cent
of the total proceeds may be used for general corporate restructuring, including
working capital requirements of the company raising the GDR.
Currently, companies are permitted to access foreign capital market through
Foreign Currency Convertible Bonds for restructuring of external debt that
helps to lengthen maturity and soften terms, and for end-use of funds which
conform to the norms prescribed for the Government for External Commercial
Borrowings (ECB) from time to time. In addition to these, not more than 25 per
cent of FCCB issue proceeds may be used for general corporate restructuring
including working capital requirements.
FCCBs are available and accessible more freely as compared to external debt,
and the expectation of the Government is that FCCBs should have a
substantially finer spread than ECBs. Accordingly, the all-in costs for FCCBs
should be significantly better than the corresponding debt instruments (ECBs).
Companies will not be permitted to issue warrants along with their Euro-issue.
The policy and guidelines for Euro-issues will be subject to review periodically.
SECTORAL CAPS
As per the Foreign Investment guidelines issued by the Government of India,
Ministry of Industry, foreign investment (equity/preference shares) upto certain
specified limits would be permitted by Reserve Bank under Automatic Route as
under:
In relaxation of earlier guidelines, GDR end - uses will include :
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Foreign investment (equity/preference) upto 50% in respect of Mining
activities;
Foreign investment (equity/preference) upto 51% in (i) industries/items
included in part 'B' of Annexure III to Ministry of Industry's Press Note No.14
(1997 series) dated 8th October 1997** and (ii) a trading company primarily
engaged in export activity; in software development
Foreign investment (equity/preference) upto 74% in industries/items
included in part 'C' of Annexure III to Ministry of Industry's Press Note No.14
(1997 series) dated 8th October 1997**
Foreign Investment upto 100% in industries/items included in Part 'D' of
Annexure III, to Ministry of Industry's Press Note No.14 (1997 Series)** as
amended from time to time provided the foreign investment in a project does
not exceed Rs.1500 crores.
GDR ISSUES
1.An Indian company may sponsor an issue of ADRs/GDRs with an overseas
depository against shares held by its shareholders at a price to be determined by
the Lead Manager, subject to compliance with provisions of the Issue of
Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository
Receipt Mechanism) Scheme, 1993 and guidelines issued by the Central
Government from time to time.
2. The Operative Guidelines for Disinvestment of shares by the Indian
companies in the overseas market through issue of ADRs/GDRs as notified by
the Government of India, Ministry of Finance vide Notification No.15/23/99-
NRI dated 29th July 2002 are enclosed.
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3. Government of India, Ministry of Finance has also issued Press Note
No.15/4/2002-NRI on July 8, 2002 (copy enclosed) regarding utilisation of
ADR/GDR/FCCB proceeds in the first stage acquisition of shares in the
disinvestment process and also in the mandatory second stage offer to the
public, in view of their strategic importance.
4. Authorized dealers may bring the contents of this circular to the notice of
their constituents concerned.
5. The directions contained in this circular have been issued under Section 10
(4) and Section 11 (1) of the Foreign Exchange Management Act, 1999 (42 of
1999).
GUIDELINES FOR ADR/GDR ISSUES BY THE INDIAN COMPANIES -
DISINVESTMENT OF SHARES BY THE INDIAN COMPANIES IN
THE OVERSEAS MARKET THROUGH ISSUE OF ADRS/GDRS
(i) Divestment by shareholders of their holdings of Indian companies, in the
overseas markets would be allowed through the mechanism of Sponsored
ADR/GDR issue in respect of:-
(a) Divestment by shareholders of their holdings of Indian companies listed in
India;
(b) Divestment by shareholders of their holdings of Indian companies not listed
in India but which are listed overseas.
(ii) The process of divestment would be initiated by such Indian companies
whose shares are being offered for divestment in the overseas market by
sponsoring ADR/GDR issues against the block of existing shares offered by the
shareholders under the provisions of these guidelines.
26 | P a g e
(iii) Such a facility would be available pari-passu to all categories of
shareholders, of the company whose shares are being sold in the ADR/GDR
markets overseas. This would ensure that no class of shareholders gets a special
dispensation.
(iv) The sponsoring company, whose shareholders propose to divest existing
shares in the overseas market through issue of ADRs/GDRs will give an option
to all its shareholders indicating the number of shares to be divested and the
mechanism how the price will be determined under the ADR/GDR norms. If the
shares offered for divestment are more than the pre-specified number to be
divested, shares would be accepted for divestment in proportion to existing
holdings.
(v) The proposal for divestment of the existing shares in the ADR/GDR market
would have to be approved by a special resolution of the company whose shares
are being divested.
(vi) The proceeds of the ADR/GDR issue raised abroad shall be repatriated into
India within a period of one month of the closure of the issue.
(vii) Such ADR/GDR issues against existing shares arising out of the
divestment would also come within the purview of the existing SEBI Takeover
Code if the ADRs/GDRs are cancelled and the underlying shares are to be
registered with the company as shareholders.
(viii) Divestment of existing shares of Indian companies in the overseas markets
for issue of ADRs/GDRs would be reckoned as FDI. Such proposals would
require FIPB approval as also other approvals, if any, under the FDI policy.
27 | P a g e
(ix) Such divestment inducting foreign equity would also need to conform to the
FDI sectoral policy and the prescribed sectoral cap as applicable.
Accordingly the facility would not be available where the company whose
shares are to be divested is engaged in an activity where FDI is not permitted.
(x) Each case would require the approval of FIPB for foreign equity induction
through offer of existing shares under the ADR/GDR route.
(xi) Other mandatory approvals such as those under the Companies Act, etc. as
applicable would have to be obtained by the company prior to the ADR/GDR
issue.
(xii) The issue related expenses (covering both fixed expenses like underwriting
commissions, lead managers charges, legal expenses and reimbursable
expenses) for public issue shall be subject to a ceiling of 4% in the case of
GDRs and 7% in the case of ADRs and 2% in case of private placements of
ADRs/GDRs. Issue expenses beyond the ceiling would need the approval of
RBI. The issue expenses shall be passed onto the shareholders participating in
the sponsored issue on a prorate basis.
(xiii) The shares earmarked for the sponsored ADR/GDR issue may be kept in
an escrow account created for this purpose and in any case, the retention of
shares in such escrow account shall not exceed 3 months.
(xiv) If the issues of ADR/GDR are made in more than one tranche, each
tranche would have to be treated as a separate transaction.
28 | P a g e
(xv) After completing the transactions, the companies would need to furnish full
particulars thereof including amount raised through ADRs/GDRs, number of
ADRs/GDRs issued and the underlying shares offered, percentage of foreign
equity level in the Indian company on account of issue of DRs/GDRs, details of
issue parameters, details of repatriation, and other details to the Exchange
Control Department of the Reserve Bank of India, Central Office, Mumbai
within 30 days of completion of such transactions.
(xvi) The tax provision under Section 115 AC of the Income Tax Act 1961,
which is applicable to non-resident investors for ADR/GDR offering against
issue of fresh underlying shares would extend to non-resident investors
investing in foreign exchange in ADRs/GDRs issued against disinvested
existing shares, in terms of the relevant provisions of the Income Tax Act, 1961
(xvii) Resident shareholders divesting their holdings will be subject to Capital
Gain tax provisions applicable under the Income Tax Act 1961 i.e. Section 115
AC applicable for non-residents would not extend to them.
ISSUE OF GDR GUIDELINES & CHECKLIST ETC.
Checklist for in-principle approval for issue of GDR:
1. CTC of Board Resolution for approving the issue of GDRs.
2 .CTC of AGM / EGM Notice sent to Shareholders along with explanatory
statement annexed thereto where the proposal for issue is to be put for approval.
3 .CTC of the resolution passed by the shareholders at the AGM / EGM
approving the issue / increase in the authorised share capital.
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4 .Confirmation from the Company that the Equity Shares so issued / arising on
conversion of any convertible instrument so issued shall rank pari passu with
the existing shares of the Company in all respects including dividend.
5 .Copy of the draft offer document for issue of GDRs/ADRs/FCCBs.
6 .Confirmation from the Company regarding compliance with the press note
dated 31.08.2005 No.15/4/2004-NRI for amendment to the "Issue of Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt
mechanism), Scheme, 1993 - for
(a) Eligibility of issuer;
(b) Eligibility of subscriber;
(c) Pricing of the issue;
(d) Voting rights
7 .Shareholding Pattern as per Clause 35 of the Listing Agreement - for pre and
post allotment of GDRs.
8. Copy of the approvals obtained from GOI / RBI / FEMA. In case the
Company falls under Automatic Route, the confirmation from the Company
Secreatry by giving the reference to the relevant notifications / circulars issued
by FEMA / RBI.
9 .Confirmation by the Company stating that:
i) The underlying equity shares to be represented by such GDRs/ ADRs / to be
allotted upon conversion of FCCBs. Shall rank pari passu in all respect
including dividend entitlement with the exosting equity shares of the Company.
30 | P a g e
ii) the international offering made by the Company does not in any way violate
or override or circumscribe the provisions of the SEBI Act, 1992, the Securities
Contract (Regulation) Act, 1956, FEMA, 1999, the provisions of Foreign
Exchange Management (Transfer or issue of securities by a person resident
outside India) Regulations, 2000, the provisions of Issue of Foreign Currency
Convertible Bonds and Ordinary Shares (Through Depository Receipt
Mechanism) Scheme, 1993, the Depositories Act, 1996, the Companies Act,
1956, the rules, regulations and guidelines made under these acts and guidelines
issued by GOI, RBI and / or any other appropriate authorities.
iii) The proposed issue of GDRs / ADRs / FCCBs is in confirmity with the
amended guidelines issued by the Ministry of Finance dated 31.08.2005
a) Eligibility of the issuer - The Issuer has not been restrained from accessing
the securities market by SEBI.
b) Eligibility of the subscribers - Proposed issue of GDRs / ADRs / FCCBs shall
not be made to the OCBs who are not eligible to invest in India through
portfolio route and entities prohibited to buy, sell or deal in securities by SEBI.
c) Pricing - The issue price is fixed for the proposed issue of GDRs / ADRs /
FCCBs shall not be less than the pricing formula prescribed by the Ministry of
Finance.
d) Voting Rights - The voting rights of the underlying equity shares proposed to
be issued towards GDRs / ADRs or equity shares issued on conversion of
FCCBs shall be in accordance with the provisions of the Companies Act, 1956
31 | P a g e
for amendment to the "Issue of Foreign Currency Convertible Bonds and
Ordinary Shares (Through Depository Receipt mechanism), Scheme, 1993 - for
(a) Eligibility of issuer;
(b) Eligibility of subscriber;
(c) Pricing of the issue;
(d) Voting rights
iv) The Company shall provide complete details of the holders of GDR / ADR /
FCCBs as and when demanded by the Regulatory authorities / Stock Exchanges
10 Processing Fees as may be applicable
Checklist for final approval for issue of GDRs:
1. i) Listing Application to Stock Exchanges
Part I- Letter of Application
Part II- Issue Details (for equity shares)
ii) Listing Application Forms for listing of further issue
iii) Part IV-Distribution Schedule - pre & post - along with annexure there to
2. Distinctive Numbers of the shares issued
3.CTC of the Board Resolution for approving the issue of GDRs
4.CTC of AGM / EGM Notice sent to Shareholders along with explanatory
statement annexed thereto where the proposal for issue is to be put for approval
5.CTC of the resolution passed by the shareholders at the AGM / EGM
approving the issue / increase in the authorised share capital
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6.CTC of the resolution for allotment of shares under GDRs
7.List of GDRs holders a long with their addresses the no. of GDRs allotted
8.Shareholding Pattern as per Clause 35 - pre and post
9.Certified copy of the MOA / AOA
10. CTC of the letter of offer
11. CTC of the letter issued by overseas stock exchange granting listing
permission
12. Copy of the approvals from GOI/RBI/FEMA, if the Company falls under
the automatic route
13. Auditors' Certificate stating that:
a) Receipt of funds against the said issue prior to the allotment
b) the pricing of the issue along with the detailed working of the same
14. Certificate from the Company Secretary stating that:
a) the issue being under 'Automatic route' as per notification of MOF vide
Fno.15/7/99-NRI dated 19.01.2000 or the relevant permissions from MOF and
RBI
b) underlying equity shares issued towards GDRs shall rank pari passu in all
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respects including dividend entitlement with the existing equity sahres of the
Company.
c) all the legal and statutory formalities have been complied with and no
statutory / regulatory authorities has restrained the Company from issuing and
allotting the shares under GDRs
d) the price of the shares issued by the Company is in accordance with the
pricing norms prescribed by RBI
15. The details of the each of the promoters / directors on the Board of the
Company as per format
Fees payable to Stock Exchanges
Processing Fees
Additional Listing fees
Depositories:
1. Corporate Action Form
2 .Certified true copy of Shareholders' Resolution under Section 81(1A)
3. Certified true copy of Board resolution for allotment of equity shares
(conversion into equity shares)
4. Copy of “In-Principle” listing approval of the Stock Exchanges for listing of
equity shares.
5. Demand Draft towards corporate action fees in favour of :
---National Securities Depository Limited
---Central Depository Services (India) Limited
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6. Processing Fees of Rs._______/- plus Service Tax
RBI:
1. Details of the Capital structure before and after the offering within 30 days of
the closure of the issue.
2. Furnishing of the of a statement in the prescribed form to the Foreign
Exchange Department, RBI, within 30 days of the closure of the issue,
providing the full particulars of the offering such as the number of GDRs
issued, the number of underlying new shares issued, listing arrangements, total
proceeds of the offering, any proceeds of the offering retained abroad and other
relevant details of the launching and initial trading of the GDRs.
3. To inform the RBI of any repatriation of issue proceeds held abroad,
immediately upon such repatriation.
4 .To furnish quarterly return within 15 days of the close of the each calender
quarter
* In the event, the offering related expenses (covering fixed expenses and other
reimbursable expenses) exceed the ceiling of 4% of the total GDRs offering, the
Company will have to obtain prior RBI approval.
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SCHEME FOR ISSUE OF ADR/GDR LINKED STOCK OPTION FOR
EMPLOYEES OF SOFTWARE COMPANIES IN INDIA
(i) A software company which has already floated ADR/GDR or a company
which is proposing to float ADR/GDR would be entitled to issue ADR/GDR
Linked Stock Options to its employees.
A software company which proposes to issue ADR/GDR linked stock option to
its employees should clearly include such proposal as part of its application for
ADRs/GDRs. While Government of India, Ministry of Finance, Department of
Economic Affairs, approval will be for total issue size inclusive of stock option,
the ADRs/GDRs earmarked for the employees up to the specified limit will be
issued by the company as and when an employee exercises his stock option.
Accordingly, the company shall not exceed the approved level of ADRs/GDRs
to be issued by it at any point of time.
In the case of software companies which have already issued ADRs/GDRs, such
companies may seek permission for issue of stock options for existing
ADR/GDR issue, observing the general parameters of the guidelines.
(ii) The scheme would be available to listed and unlisted software Indian
companies which fulfil the performance track record eligibility and other
requirements under ADR/GDR guidelines of Government of India.
(iii) A software company would be defined as a company engaged in
manufacture or production of software whose turnover from software activities
is not less than 80 per cent.
(iv) A software company applying to Government of India for issue of
ADR/GDR linked stock options shall be required to submit relevant documents
36 | P a g e
certified by a Chartered Accountant, establishing that they are a software
company conforming to the stipulation indicated above. The relevant documents
shall also be submitted to Reserve Bank while applying for permission for
remittances of foreign exchange for acquisition of ADRs/GDRs in exercise of
the stock option.
(v) The stock option shall be available to non-resident and resident permanent
employees (including Indian and overseas working directors) of the company.
The stock options shall not be available to the promoters and their relatives (as
defined under the Companies Act).
(vi) The eligible employees can remit up to U.S.$ 50,000 in a block of five
years for acquisition of ADRs/GDRs. Upon liquidation of ADR/GDR holdings
the proceeds should be repatriated to India unless permission from Reserve
Bank is obtained for its retention or use abroad.
(vii) Issue of stock options shall require a special resolution as applicable for
preferential allotment of shares. The allotment of stock options shall be done by
a Committee of the Board of Directors of the company. The Committee of
Directors shall have a minimum of two non executive members of the Board as
its members.
(viii) The issuing company would be entitled to issue options not exceeding
10% of its issued and paid up equity capital.
(ix) The stock options may be issued at a discount of not more than 10% to the
market price prevailing at the time of the issue of the stock option.
(x) While ADRs/GDRs acquired in exercise of the stock option shall be freely
transferable, the stock options themselves shall be non-transferable.
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(xi) Full disclosure should be made in the Directors Report or in an Annexure to
the Directors Report, of the details of the stock option scheme by the company.
ACQUISITION OF FOREIGN SECURITIES BY RESIDENT
INDIVIDUALS- ADR/GDR LINKED EMPLOYEES STOCK OPTION
(ESOP) SCHEMES
1.An Indian software company allow its resident employees (including working
directors) to purchase foreign securities under the ADR/GDR linked
Employees’ Stock Option (ESOP) Schemes, provided that the consideration for
purchase does not exceed USD 50,000 or its equivalent in a block of five
calendar years.
The coverage of the facility to acquire such ESOP was expanded later to include
employees of all companies in the knowledge based sectors vide Guidelines
dated September 15, 2000 (Annex-I) issued by the Ministry of Finance,
Government of India.
2. It has now been decided by the Government that the issue of ESOP by a
listed company in the knowledge-based sectors falling within the purview of the
aforesaid Guidelines dated September 15, 2000, will be governed by SEBI
(Employees Stock Option and Stock Purchase Scheme) Guidelines, 1999.
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(xii) ADRs/GDRs acquired on exercise of stock option would be eligible for
concessional tax treatment under 115AC of Income-tax Act, 1961.
(Necessary amendments under Section 115AC of the Income-tax Act, 1961
shall be notified by the Government of India, Ministry of Finance,
Department of Revenue, separately.
3. The issue of ESOP by an unlisted company in such knowledge-based
sectors shall continue to be governed by the guidelines issued by the
Government of India for issue of ADR/GDR linked stock options to its
employees.
4. AD banks may henceforth make remittances up to USD 50,000 or its
equivalent in a block of five calendar years, which is the current limit per
eligible employee, without prior approval of Reserve Bank, for purchase of
foreign securities under the ADR/GDR linked ESOP Scheme, after satisfying
that the issuing company has followed the relevant guidelines of
SEBI/Government. A copy of Government Press Note F.No.15/14/2001-NRI
dated July 26, 2004 is enclosed (Annex-II).
5. Necessary amendments to the Foreign Exchange Management (Transfer or
issue of any foreign security) Regulations, 2000 are being issued separately.
6. Authorised Dealer Banks may bring the contents of this circular to the notice
of their constituents and customers.
7. The direction contained in this circular has been issued under Sections10(4)
and 11(1) of the Foreign Exchange Management Act,1999 (42 of 1999) and is
without prejudice to permissions/approvals, if any, required under any other
law.
LIBERALISATION IN THE GUIDELINES FOR ISSUE OF ADR/GDR
LINKED EMPLOYEES STOCK OPTIONS BY THE INDIAN
COMPANIES
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Guidelines by way of a Press Note were issued on 23rd June, 1998 containing
operational parameters and modalities for issue of ADR/GDR linked stock
options to its employees by the Indian Software Companies.
Revisions/modifications to expand the scope of application to the Indian
companies engaged in Information Technology Software and Information
Technology Services had been issued on 16th September 1998.
These Guidelines were further modified by the Government on the 16th June
2000, expanding the coverage of employees who would be entitled to the
ESOPs in line with the SEBI Guidelines on ESOPs, which include employees of
a subsidiary company for the purposes of ESOPs.
1.Enabling amendment Notification operating the facility for ADR/GDR linked
employees stock options had been issued by Government on 10th November,
1999 under the “Scheme for issue of Foreign Currency Convertible Bonds and
Ordinary Shares (Through Depository Receipts Mechanism)”.
2. Guidelines were issued on the 23rd March 2000 liberalising the norms for
overseas business acquisition by Indian companies in terms of which;
----the norms for acquisition of overseas companies was extended to
Information Technology and Entertainment software, Pharmaceuticals,
Biotechnology and any other activity within the knowledge based sector as
notified by the Government from time to time and;
----In the case of multi product diversified company, not conforming to the
eligibility criteria of 80% of the turnover from the sectors/areas mentioned
above, the liberalised norms would be applicable if they have an average
annual export earnings of Rs.100 Crores in the three previous financial years
in these sectors/areas.
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3. It has been decided to extend the liberalised norms as mentioned in para-2
above in respect of the issue of ADR/GDR linked Employee Stock Options as
well. This would imply that :
----The companies in the following knowledge based sectors would be eligible
to issue ADR/GDR linked ESOPs with a view to enable retaining their
highly skilled personnel;
i. Information Technology (as defined in the recommendation No.19
(a) and (b) of Gazette Notification dated 25.07.1999 issued by the
Planning Commission) & Entertainment software.
ii. Pharmaceuticals;
iii. Biotechnology;
iv. Any other activities within the knowledge based sector as
v. notified by the Government from time to time.
----The liberalized norms would also be available to multi product diversified
Companies which do not conform to the criteria of 80% of its turnover from
the sectors, in case they fulfill the condition of average annual export earnings
of Rs.100 Crores from these sectors in the three previous financial years.
4. These guidelines will come into force with immediate effect.
THE RBI HAS ALREADY GIVEN GENERAL PERMISSION TO
BROKERS (NOT BANKS, BUT SEBI REGISTERED STOCKBROKERS.
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RBI has conveyed general permission through a Notification
No.FEMA.41/2001-RB dated 2nd March 2001, for these brokers to buy shares
on behalf of the overseas investor) to buy shares on behalf of overseas
investors (this include both foreign investors as well as domestic shareholders).
As secondary market operations, the acquisition of shares on behalf of the
overseas investors through the intermediary would fall within the regulatory
purview of Securities and Exchange Board of India (SEBI). The Central bank
has said that since the demand for re-conversion of shares into ADRs/GDRs
would be from overseas investors and not the company, the expenses would be
borne by the investor. The transactions will be governed by the Income-Tax
Act.
In order to further simplify the procedure, the Reserve Bank of India has today
granted general permissions under the Foreign Exchange Regulation Act
(FERA)-1973 to Indian companies to make an international offering of Rupee
denominated equity shares of the company by way of issue of American
Depositary Receipts/Global Depositary Receipts (ADRs/GDRs). Besides, the
necessary permissions under FERA-1973 for issue and export of ADRs/GDRs
by the Indian company and acquisition of ADRs/GDRs by foreign investors
have also been granted. Various other permissions necessary for launching an
ADR/GDR issue have also been granted to the issuing companies.
Recently, the Government of India has made certain changes in the guidelines
for ADR/GDR issues by the Indian companies in terms of which Indian
companies issuing ADRs/GDRs need not approach Ministry of Finance,
Government of India for prior approval, subject to the Reserve Bank of India's
(RBI) approval under FERA-1973. These changes seek to further liberalize the
operational procedures by dispensing with the track record scrutiny process and
the two-stage approval by the Ministry of Finance, Department of Economic
Affairs for ADR/GDR issues.
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Issuing companies may now enter into agreements in respect of or ancillary to
the offer including but not limited to the Subscription Agreements and Deposit
Agreement and to provide the necessary warranties and indemnities in
accordance with international practices. Depositories may remit the dividends
by purchasing foreign currency at the prevailing market rates through an
authorised dealer in foreign exchange.
ADR, GDR NORMS FURTHER RELAXED
Indian bidders allowed to raise funds through ADRs, GDRs and external
commercial borrowings (ECBs) for acquiring shares of PSEs in the first
stage and buying shares from the market during the open offer in the
second stage.
Conversion and reconversion (a.k.a. two-way conversion or fungibility)
of shares of Indian companies into depository receipts listed in foreign
bourses, while extending tax incentives to non-resident investors,
allowed.
The re-conversion of ADRs/GDRs would, however, be governed by the
Foreign Exchange Management Act notified by the Reserve Bank of
India in March 2001.
Permission to retain ADR/GDR proceeds abroad for future foreign
exchange requirements, removal of the existing limit of $20,000 for
remittance under the employees stock option scheme (ESOP) and
permitting remittance up to $ 1 million from proceeds of sales of assets
here.
Companies have been allowed to invest 100 per cent of the proceeds of
ADR/GDR issues (as against the earlier ceiling of 50%) for acquisitions
43 | P a g e
of foreign companies and direct investments in joint ventures and wholly-
owned subsidiaries overseas.
Any Indian company which has issued ADRs/GDRs may acquire shares
of foreign companies engaged in the same area of core activity upto $100
million or an amount equivalent to ten times of their exports in a year,
whichever is higher. Earlier, this facility was available only to Indian
companies in certain sectors.
FIIs can invest in a company under the portfolio investment route upto 24
per cent of the paid-up capital of the company. It can be increased to 40%
with approval of general body of the shareholders by a special resolution.
This limit has now been increased to 49% from the present 40%.
Two way fungibility in ADR/GDR issues of Indian companies has been
introduced subject to sectoral caps wherever applicable. Stock brokers in
India can now purchase shares and deposit these with the Indian
custodian for issue of ADRs/GDRs by the overseas depository to the
extent of the ADRs/GDRs that have been converted into underlying
shares.
GDRS / ADRS ISSUES BY FIS
1.FIs are permitted to raise capital through issue of Global Depository Receipts
(GDRs) or American Depository Receipts (ADRs) within the limits prescribed
for Foreign Direct Investment by the Government of India. As per the
guidelines issued by the Government of India for ADR / GDR issues, FIs are
eligible for GDR / ADR issues without reference to the end-usecriteria with the
restriction that investments in stock market and real estate are not permitted.
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2. The issue of repatriation of the proceeds of GDRs / ADRs issued by FIs has
been reviewed by us. Considering the fact that FIs, which are raising capital
abroad for improving their capital base, have largely rupee-denominated assets
and that most of the risk limits are linked to their capital, FIs are advised to
repatriate the entire proceeds of GDRs / ADRs soon after the issue process is
completed. This provision would also be applicable to direct investments in FIs
made by NRIs /OCBs, foreign banking companies or finance companies,
including multilateral institutions.
MODIFICATION TO GUIDELINES FOR ISSUE OF ADR / GDR
LINKED EMPLOYEES STOCK OPTIONS BY THE INDIAN
COMPANIES
1.Guidelines by way of a Press Note were issued on 23rd June, 1998 for Issue
of ADR / GDR linked stock options under the “Scheme for issue of Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depository
Receipts Mechanism)”. Revisions / modifications to expand the scope of
application, sectors, eligible employees etc., were made from time to time.
2. In order to rationalise the guidelines governing issuance of stock options by
Indian companies, Government have decided that henceforth, issuance of
employees stock options by all listed companies in the knowledge-based sectors
will be governed by SEBI (Employee Stock Option and Stock Purchase
Scheme)Guidelines, 1999.
3. However, unlisted Indian companies in the knowledge-based sectors will
continue to be governed under guidelines issued by Government for issue of
ADR / GDR linked stock options to its employees.
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4. The above modification to the ADR / GDR linked Stock options will come
into force from the date of issuance of Notification of regulations / directions.
AMENDMENT TO THE "ISSUE OF FOREIGN CURRENCY
CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH
DEPOSITARY RECEIPT MECHANISM) SCHEME, 1993"
1. In order to bring the ADR/GDR guidelines in alignment with guidelines on
domestic capital issues framed by the Securities and Exchange Board of India
(SEBI), the Government of India has brought about certain changes to the
guidelines on GDR/ADR guidelines by amending the Foreign Currency
Convertible Bonds and Ordinary Shares (Through Depositary Receipt
Mechanism) Scheme, 1993.
2. A copy of the Press Note F.No.15/4/2004-NRI dated August 31, 2005 issued
by the Government of India, Ministry of Finance and the Government
Notification dated August 31, 2005 is annexed (Annex 1 and 2, respectively).
3. Necessary amendments to the Foreign Exchange Management (Transfer or
issue of Security by a Person Resident outside India) are being issued
separately.
4. Authorised Dealer banks may bring the contents of this circular to the notice
of their constituents and customers concerned.
5. The directions contained in this circular have been issued under sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999)
and is without prejudice to permissions / approvals, if any, required under any
other law.
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A Scheme for issue of Foreign Currency Convertible Bonds and Ordinary
Shares (Through Depositary Receipt Mechanism) Scheme was notified by the
Government of India on 12th November, 1993. Revisions/modifications in the
operative guidelines of the Scheme have been made from time to time. In order
to bring the ADR/GDR guidelines in alignment with SEBI’s guidelines on
domestic capital issues, it has been decided by the Government to incorporate
the following changes to the GDR/ADR guidelines by mending the Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt
Mechanism) Scheme:-
A. For listed companies
a) Eligibility of issuer: An Indian Company, which is not eligible to raise funds
from the Indian Capital Market including a company which has been restrained
from accessing the securities market by the Securities and Exchange Board of
India (SEBI) will not be eligible to issue
(i) Foreign Currency Convertible Bonds and
(ii) Ordinary Shares through Global Depositary Receipts under the Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt
Mechanism) Scheme, 1993.
b) Eligibility of subscriber:
Erstwhile Overseas Corporate Bodies (OCBs) who are not
eligible to invest in India through the portfolio route and entities prohibited to
buy, sell or deal in securities by SEBI will not be eligible to subscribe to
(i) Foreign Currency Convertible Bonds and
(ii)Ordinary Shares through Global Depositary Receipts under the Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depositary
Receipt Mechanism) Scheme, 1993.
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c) Pricing:
The pricing of Global Depositary Receipt and Foreign Currency Convertible
Bond issues should be made at a price not less than the higher of the following
two averages:
(i) The average of the weekly high and low of the closing prices of the
related shares quoted on the stock exchange during the six months
preceding the relevant date;
(ii) The average of the weekly high and low of the closing prices of
the related shares quoted on a stock exchange during the two weeks
preceding the relevant date. The “relevant date” means the date thirty days prior
to the date on which the meeting of the general body of shareholders is held, in
terms of section 81 (IA) of the Companies Act, 1956, to consider the proposed
issue.
d) Voting rights: The voting rights shall be as per the provisions of the
Companies Act, 1956 and in a manner in which restrictions on voting rights
imposed on Global Depositary Receipt issues shall be consistent with the
Company Law provisions. RBI regulations regarding voting rights in the case of
banking companies will continue to be applicable to all shareholders exercising
voting rights.
B. For unlisted companies
Unlisted companies, which have not yet accessed the Global Depositary Receipt
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Foreign Currency Convertible Bond route for raising capital in the international
market would require prior or simultaneous listing in the domestic market,
while seeking to issue
(i) Foreign Currency Convertible Bonds and
(ii) Ordinary Shares through Global
Depositary Receipts under the Foreign Currency Convertible Bonds and
Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993. It is
clarified that unlisted companies, which have already issued Global Depositary
Receipts / Foreign Currency Convertible Bonds in the international market,
would now
require to list in the domestic market on making profit beginning financial year
2005-06 or within three years of such issue of Global Depositary Receipts /
Foreign Currency Convertible Bonds, whichever is earlier.
PROPOSED CHANGES IN THE ADR/GDR’S PRICING GUIDELINES
1. The “Issue of Foreign Currency Convertible Bonds and Ordinary Shares
(Through Depositary Receipt Mechanism) Scheme, 1993” was initiated in 1993
to allow the Indian Corporate sector to access global capital markets through
issue of Foreign Currency Convertible Bonds(FCCBs)/Equity Shares under the
Global Depository Receipt Mechanism (GDR) and American Depository
Receipt Mechanism (ADR). The Scheme has been amended several times since
then.
2. In order to bring the ADR/GDR guidelines in alignment with SEBI’s
guidelines on domestic capital issues, Government, vide Press Note dated
August 31, 2005, amended the pricing guidelines for Indian listed companies
issuing FCCB/ADR/GDR. The present pricing clause, thus, reads as under:
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“Listed Companies – The pricing should not be less than the higher of the
following two averages:
(i) The average of the weekly high and low of the closing prices of the related
shares quoted on the stock exchange during the six months preceding the
relevant date;
(ii) The average of the weekly high and low of the closing prices of the related
shares quoted on a stock exchange during the two week preceding the relevant
date. The “relevant date” means the date thirty days prior to the date on which
the meeting of the general body of shareholders is held, in terms of section 81
(IA) of the Companies Act, 1956, to consider the proposed issue.”
3. In the normal circumstances the extant pricing norms provides protection
from price manipulation by the Issuer in domestic market.
4. In the recent period, Government has received a number of representations
from corporates that the extant pricing norms affect them adversely in the
falling market.
5. In order to remove hardship to companies in a falling market, Government is
considering to modify the pricing guidelines for ADR/GDR issues. The
proposal is to amend the parameter (i) of the pricing norms to ‘two months’ in
place of ‘six months’. In addition the definition of ‘the relevant date’ for such
issues is also proposed to be modified as per SEBI (DIP) guidelines on
preferential allotment and qualified institutions placements (QIP).
6. After the incorporation of proposed changes, the new pricing norms for
ADR/GDR issues will read as under:
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“Listed Companies – The pricing should not be less than the higher of the
following two averages:
The average of the weekly high and low of the closing prices of the related
shares quoted on the stock exchange during the two months preceding the
relevant date;
The “relevant date” means the date when the Board of the issuing company
passes the resolution authorizing the proposed issue.
ABOUT COX & KINGS LTD: (BSE: 533144 | NSE: COX&KINGS)
Cox & Kings Ltd.,(CKL), is the longest established travel company in the world
since 1758 and in December 2009 successfully listed on the stock exchange in
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India. Its distinguished history began when it was appointed as general agents to
the regiment of Foot Guards in India under the command of Lord Ligonier and
handled the Royal Cavalry, Artillery and Infantry, Royal Wagon Train, the
Household Brigade, the Royal Navy and the Royal Air Force came under its
wings.
Today, it is a premium brand in all travel related services, employing over 1,400
professionals and headquartered in India.
The company is networked through a mix of branch sales offices, franchised
sales shops, General Sales Agents (GSAs), and Preferred Sales Agents (PSAs).
The company has 14 branch sales offices located in Mumbai, New Delhi,
Chennai, Kolkata, Bangalore, Hyderabad, Ahmedabad, Jaipur, Kochi, Pune,
Nagpur and Goa. The company has appointed 94 franchisees across 20 states
covering 70 cities. The company's extensive network of 185 GSAs and PSAs
covering all major towns and cities of India enhances its reach.
It has subsidiaries in UK, Australia, New Zealand, Japan, US, UAE and
Singapore and operates from Moscow (Russia), Maldives and Tahiti through
branch offices and Spain, Sweden, Germany, Italy, France, South America and
South Africa through representative offices.
The company owns Tempo Holidays Australia, East India Travel Company in
North America, ETN in the UK and Quoprro Global Services Pvt Ltd,(visa
processing). In December 2009 it also acquired MyPlanet Australia Pty Ltd and
Bentours International Pty Ltd in Australia.
The business can be broadly categorised as Leisure Travel, Corporate Travel,
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MICE, Trade Fairs, Visa Processing and foreign exchange.
Over the last two years the company has won many awards. In January 2010 it
was awarded the Most Admired Tour Operator by SATTE. Cox & Kings has
also been awarded First Runner up in the Best Large Tour Operator category
awarded by the Telegraph Ultra Travel luxury survey UK 2010 and First
Runner Up in the Favourite Tour Operator category awarded by Condé Nast
Traveller Readers' Choice Awards (2010). In 2009, it won the Best Domestic
Tour Operator, Most Innovative Travel Company and the Best Inbound Tour
Operator award at the TAFI TravelBiz Monitor Awards. It won the Today's
Traveller Platinum Award for the most innovative travel company and it also
won the Economic Times Award for the Best Outbound Tour Operator in India.
In 2008, Mr. Ajay Ajit Peter Kerkar, Global CEO, Cox & Kings was honoured
with the WTM Global Award 2008 for his remarkable contribution to the travel
and tourism industry by the World Travel Market (WTM).
CKL is one of the founding members of the World Travel and Tourism Council
(WTTC), and are members of premier industry associations namely the Travel
Agents Federation of India (TAFI), the Travel Agents Association of India
(TAAI), Indian Association of Tour Operators (IATO), and the Pacific Asia
Travel Association (PATA)
Subsidiary Companies
Ministry of Corporate Affairs, Government of India has granted approval that
the requirement to attach various documents in respect of subsidiary companies,
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as set out in sub-section (1) of Section 212 of the Companies Act, 1956, shall
not apply to the Company. Accordingly, the Audited Statements of Accounts
and the Auditors’ Reports thereon for the year ended 31st March 2010 along
with the Reports of the Board of Directors of the Company’s subsidiaries have
not been annexed. The Company will make available these documents upon
request by any member of the Company interested in obtaining the same.
However, as directed by the Central Government, the financial data of the
subsidiaries have been furnished under ‘ Subsidiary Companies’ Particulars
forming part of the Annual Report. Further pursuant to Accounting Standard 21
issued by the Institute of Chartered Accountants of India, Consolidated
Financial Statements presented by the Company in this Annual Report include
the financial information of its subsidiaries.
Investments in direct subsidiaries
As on 31st March, 2010 your Company had invested an aggregate of Rs.
5273.56 Lacs as loan, in its direct subsidiaries Cox & Kings Ltd, UK, Cox &
Kings Singapore Private Limited, Clearmine Limited UK, Quoprro Global
Services, UK, Quoprro Global Services Private Limited and Cox & Kings
(Australia) Pty Ltd.
Incorporation of New Subsidiaries
During the year under review, your Company has invested Rs. 22.22 Lacs in
Quoprro Global Services UK, a 100% subsidiary of the Company. The main
object of Quoprro Global Services UK is to provide comprehensive visa
processing services to diplomatic missions.
Mergers and Acquisitions
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Your Company continued to pursue the strategy of acquiring businesses which
complement our service offerings, provide access to niche skill sets and expand
our presence in select geographies. In April 2009, we completed acquisition of
East India Travel Company Inc, which is in the business of selling
upmarket tour and travel packages in the United States of America. East India
Travel Company Inc was acquired by our step-down subsidiary in UK, Cox &
Kings Travel Limited. In December 2009, Cox & Kings (Australia) Pty Ltd, a
wholly owned subsidiary of the Company has acquired 100% shares of My
Planet Australia Pty Limited & Bentours International Pty Limited, through
share sale agreement from First Choice Holdings Australia Pty Ltd, a European
tourism group which is part of the TUI Travel Plc Group of Companies. The
acquisition has been done through an earn-out mechanism. The business of the
acquired companies is currently Trading under the brand MyBentours for its
wholesale FIT & leisure groups to Scandinavia and has a well established
retail operation.
Consolidated Financial Statements
In accordance with the Accounting Standard AS- 21 on Consolidated Financial
Statements read with Accounting Standard AS-23 on Accounting for
Investments in Associates and AS-27 on Financial Reporting of Interest in Joint
Ventures, the Consolidated Financial Statements are provided in the annual
report.
Corporate Governance
Your Company believes Corporate Governance is at the heart of Shareholder
value creation. The Board has also evolved and adopted a Code of Conduct
based on the principles of Good Corporate Governance and best management
practices being followed globally. The code is available on the website
of the Company www.coxandkings.com. A report on the Corporate Governance
in term of clause 49 of the Listing Agreement with Stock Exchanges along with
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the Auditors’ Certificate on its compliance forms part of this report.
Fixed Deposits
Your Company has not accepted any fixed deposits within the meaning of
Section 58(A) of the Companies Act, 1956 during the year.
Awards and Recognition during the year under review:
1. “First Runner Up” in the Best Large Tour Operator category awarded by the
Telegraph Ultra Travel luxury survey UK 2010.
2. “First Runner Up” in the Favourite Tour Operator category awarded by
Condé Nast Traveller Readers’ Choice Awards (2010).
3. “Most admired tour operator 2010” awarded by
SATTE (2010)
4. “Best Domestic Tour Operator” awarded by the Abacus TAFI TravelBiz
Monitor Awards (2009).
5. “Best Inbound Tour Operator” awarded by the Abacus TAFI TravelBiz
Monitor Awards (2009).
6. “Most Innovative Product Launch” awarded by the Abacus TAFI TravelBiz
Monitor Awards (2009).
7. “India’s Top Rated Tour Operator – Outbound 2009” awarded by The
Economic Times, India’s largest business daily
8. “Most Innovative Travel Company of 2009” awarded by Today’s Traveller
Platinum Award.
Acknowledgements and Appreciation
Your Directors take this opportunity to thank all investors, customers, vendors,
banks/financial institutions, regulatory and government authorities and Stock
exchanges for their consistent support and encouragement to the Company. The
Directors also place on record their sincere appreciation to all employees of the
Company for their hard work, dedication and commitment. The enthusiasm and
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unstinting efforts of the employees have enabled the Company to remain at the
forefront of the Industry
Recent Acquisitions
C&K has grown rapidly through acquisitions in recent years. As part of its
growth strategy, C&K continuously looks for acquisition opportunities to
increase the breadth of its product offerings, provide synergies with its existing
operations and expand its global presence. The following table sets forth
information relating to investments made in other companies during the year.
Critical Accounting Policies
C&K’s consolidated financial statements have been prepared in accordance
with the Accounting Standard-21 “Consolidated Financial Statement” and
Accounting Standard-27 “Financial reporting of Interest in Joint Ventures”
issued by the ICAI/ Companies (Accounting Standards) Rules, 2006.
While all aspects of financial statements should be read and understood in
assessing C&K’s current and expected financial condition and results of
operations, C&K believes that the following critical accounting policies warrant
particular attention.
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Revenue
In line with generally accepted accounting practices, revenue comprises net
commissions earned on travel management, service agency charges including
margins in respect of tour and tour related services and commissions/margin
earned on foreign exchange transactions in the normal course of C&K’s
business as an authorised dealer. The income arising from the buying and
selling of foreign currencies has been included on the basis of margins
achieved.
Revenue Recognition
In accordance with the Company’s accounting policy, commissions and/or
income arising from tours and related services is recorded after netting off all
direct expenditures relating thereto
Expenditure
All general business expenditure is recorded in the year in which it is incurred.
All direct tour related expenses including advertisement expenses for
specific tours are recorded in the year in which the tours are undertaken.
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation. Costs include all
costs relating to acquisition and installation of fixed assets. Intangible
assets include “customer data base and contacts” which are stated at the valued
amounts and software, which is stated at cost.
Investments
Long-term investments are valued at cost. Provision for diminution in value of
investments is made if the diminution is of a nature other than temporary.
Current investments are valued at the lower of cost and market value.
Inventory
Inventory represents stock of foreign currencies, which we value at the lower of
cost and realizable value as at the year-end.
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Foreign Currency Transactions
Transactions denominated in foreign currencies are recorded at spot rates /
average rates. Monetary items denominated in foreign currencies at the year
end are restated at year end rates. Non monetary foreign currency items are
carried at cost.
• In respect of branches, which are integral foreign operations, all transactions
are translated at rates prevailing on the date of transaction or that approximate
the actual rate on the date of transaction. Branch monetary assets and liabilities
are restated at the year end rates.
• Any income or expense on account of exchange difference either on settlement
or on translation is recognised in the profit and loss account.
Accounting for taxes on Income
Provision for current tax is made based on the tax payable under the relevant
statute. Deferred tax on timing differences between taxable income and
accounting income is accounted for using the tax rates and the tax laws enacted
or substantially enacted as on the balance sheet date. Deferred tax assets are
recognized only to the extent that there is a reasonable certainty of its
realisation.
Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are
recognized when there is a present obligation as a result of past events and it is
probable that there will be an outflow of resources. Contingent liabilities are not
recognized but are disclosed in the notes. Contingent assets are neither
recognized nor disclosed in the financial statements.
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Income
C&K’s income increased by 50.32% to Rs.44,126.83 lacs in the year ended
March 31, 2010 from Rs.29,356.14 lacs in the year ended March 31, 2009.
Commission and other operating income C&K’s operating income in the year
ended March 31, 2010 increased by 39.13% to Rs.39,915.40 lacs in
the year ended March 31, 2010 from Rs.28,690.02 lacs in the year ended March
31, 2009. The increase in operating income was attributable principally to a
40.17% increase in travel and tours commissions to Rs.39,012.58 lacs in the
year ended March 31, 2010 from Rs.27,832.28 lacs in the year ended March 31,
2009. The increase in travel and tours commissions was attributable primarily to
the following reasons:
(i) higher net income because of C&K’s ability to undertake consolidated
buying efforts in the year ended March 31, 2010; and (ii) revenues from C&K’s
subsidiaries in Australia (Tempo Holidays) and theUnited States (East India
Travel) that it acquired in November 2008 and April 2009, respectively.
Other income
Other income increased by 532.28% to Rs.4,211.43 lacs in the year ended
March 31, 2010 from Rs.666.12 lacs in the year ended March 31, 2009. This
increase was attributable primarily to foreign exchange gain from the
revaluation of borrowings by our Australian subsidiary, Cox & Kings
(Australia) Pty Limited
Expenditure
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C&K’s expenditure increased by 30.46% to Rs. 25,476.31 lacs in the year ended
March 31, 2010 from Rs.19,527.71 lacs in the year ended March 31,
2009.
Contingent Liabilities
Contingent liabilities as of March 31, 2010 included the following:
Particulars Amount (Rs. in lacs )
Guarantees provided by banks 12,924.02
Claims against Company not acknowledged as debts 1,279.37
Disputed income Tax 295.67
Foreign Exchange Risk
Fluctuations in exchange rates have direct impact on business. Strengthening of
the rupee may increase the number of outbound tourists from India as foreign
tours will become relatively cheaper. However, at the same time it may affect
inbound tourism as travelling to India would become relatively expensive and
vice versa. C&K also has significant levels of indebtedness denominated in
USD, comprising Rs. 31,337.28 lacs as of March 31, 2010. The revenues of
overseas subsidiaries are in Pound Sterling, in Japanese Yen, and in Australian
Dollars, while India inbound revenues are denominated in U.S. Dollars, Euro
and Pound Sterling. Whilst a large portion of the outbound tours in India are
charged to the client in the currency that is paid to the contractors, there may be
an effect on the profitability as the Company earns profits in Pounds, Yen and
Rupees depending on prevalent exchange rates. C&K reports its financial
results in Indian rupees, while portions of its total income and expenses are
denominated, generated or incurred in currencies other and indebtedness.
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than Indian rupees, such as U.S. Dollars. To the extent that its income and
expenditures are not denominated in Indian rupees, exchange rate fluctuations
could affect the amount of income and expenditure that are recorded. Any
depreciation of the rupee against the currency in which its has an exposure will
increase the rupee costs to the Company of servicing and repaying our
expenditure
Code of Conduct
The Board of Directors of your Company has prescribed a Code of Conduct for
all members of the Board and the Senior Management of your Company. The
Code of Conduct is available on your Company’s website:
www.coxandkings.comAll the members of the Board and the Senior
Management personnel of your Company have affirmed their compliance with
the Code of Conduct for the year ended March 31, 2010. A declaration signed
by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) to this
effect is attached to the Annual Report.
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GDR ISSUE IN INDIA
Travel company , Cox & Kings said that it has raised $ 65-mn through a
Global Depository Receipts (GDR) issue and would use the proceeds largely to
fund its acquisition plans.
The GDRs will be listed on the Luxembourg Stock Exchange, a press release
issued here stated.
"We are looking at acquisition targets across the world. These acquisitions will
substantially help us improve our market share, apart from adding group
synergies," the company's Executive Director, Peter Kerkar, said.
Cox & Kings has been growing aggressively by acquiring companies locally as
well as globally. "This policy of organic as well as inorganic growth will
continue," Kerkar said.
Its latest addition to its array of international acquisitions is the takeover of the
Australian firm MyPlanet Australia Pty Ltd and Bentours International Pty Ltd
from an unit of TUI Travel Pty last December.
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Travel company , Cox and Kings, has posted a 28 per cent increase in its
consolidated income from operations at Rs 107.30 crore in Q2 FY 11 as against
Rs 83.74 crore in the year-ago period.
Net profit before exceptional items stood at Rs 24.65 crore as compared to Rs
21.42 crore in the year-ago period, a press release issued here today stated.
The EBITDA for Q2 stood at Rs 48.79 crore as against Rs 36.90 crore in the
year-ago period.
During the quarter, the company raised USD 65 million through a GDR issue to
fund largely its acquisition plans. The GDRs are listed on the Luxembourg
Stock Exchange.
Cox and Kings India to issue 5341003 GDRs
Cox and Kings (India) Ltd has announced that pursuant to the resolution passed
by shareholders of the Company, the Company has decided to issue 5,341,003
GDRs, each representing one equity share having a par value of Rs. 10 each to
be issued by the Company.
The Company approves an equity offer of the GDRs on the terms described in
the Offering Circular. The gross proceeds of the offering will be approximately
USD 65 Million.
The Company will be issuing 5,341,003 GDRs, each representing one equity
share of the Company.
The Price of each GDR will be USD 12.17, which has been determined in
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accordance with the applicable Indian pricing guidelines for GDRs.
The stock was trading at Rs.559.45, down by Rs.20.65 or 3.56%. The stock hit
an intraday high of Rs.606.85 and low of Rs.554.
The total traded quantity was 162547 compared to 2 week average of 250762
Cox and Kings' Executive Director, Peter Kerkar, said, The results, this quarter
mirrors the growth witnessed in the travel industry and the successful listing of
our GDR issue indicates the confidence amongst our investors
The offer is with Greenshoe Option of 28.75 lakh additional GDRs. Cox &
Kings offer price is at Rs 569.2/sh ($ 12.17/GDR).
The stock has outperformed the market over the past one month till Aug. 16,
2010, rising 16.49% compared with the Sensex`s 0.53% rise. It outperformed
the market in past one quarter, gaining 18.78% as against 6.21% rise in the
Sensex.
Shares of the company gained Rs 11.8, or 2.03%, to trade at Rs 591.90.
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FINANCIAL HIGHLIGHTS OF COX AND KINGS
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Change in Capital Structure
Rights Issue
The Company, on 25th June 2009, opened the Rights issue of 19,547,682 equity
shares with a face value of Rs. 10/- each for cash aggregating to Rs.
19,5476,820/- to the existing shareholders of the Company on Rights Issue basis
in the ratio of 7 Rights equity shares for every 10 equity shares held on the
record date i.e. 19th June 2009. The issue was successfully closed on 22nd
July 2009.
Initial Public Offering
During the year under review, your company successfully completed the Initial
Public Offering of its securities. The issue comprised of 18,496,640 equity
shares (15,450,000 being the fresh issue of equity shares and 3,046,640 being
the offer for sale) of Rs. 10/- each at a premium of Rs. 320 per share. The issue
was over-subscribed by 5.64 times. The shares were listed on Bombay Stock
Exchange Limited and National stock Exchange.
Change in Capital Structure Rights Issue
The Company, on 25th June 2009, opened the Rights issue of 19,547,682 equity
shares with a face value of Rs. 10/- each for cash aggregating to Rs.
19,5476,820/- to the existing shareholders of the Company on Rights
Issue basis in the ratio of 7 Rights equity shares for every 10 equity shares held
on the record date i.e. 19th June 2009. The issue was successfully closed on 22nd
July 2009.
Initial Public Offering
During the year under review, your company successfully completed the Initial
Public Offering of its securities. The issue comprised of 18,496,640 equity
shares (15,450,000 being the fresh issue of equity shares and 3,046,640 being
the offer for sale) of Rs. 10/- each at a premium of Rs. 320 per share. The
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issue was over-subscribed by 5.64 times. The shares were listed on Bombay
Stock Exchange Limited and National Stock Exchange Limited on 11th
December 2009.
Credit Rating
Credit Analysis & Research Ltd (CARE), the Rating Agency, has reaffirmed
‘PR1+ (PR One plus)’ to Commercial Paper (CP) issue of the Company
amounting to Rs. 150 crore, for a maturity not exceeding one year. Instruments
with this rating indicate strong capacity for timely payment of short term
debt obligations and carry lowest credit risk. CARE has also revised the long
term rating to ‘CARE AA — (Double A minus)’ to Non - Convertible
Debenture (NCD) issue of the Company amounting to Rs. 300 crore.
Instruments with this rating indicate high safety for timely servicing of debt
obligations and carry very low credit risk.
Cox and Kings, an Indian travel agency business with roots dating back more
than 250 years, yesterday raised $65 million from the sale of its first ever global
depositary receipts (GDRs). The deal followed a non-deal road show and was
well received by large global long-only investors who already have Indian funds
or who are looking for exposure to the South Asian country.
Like many other Indian follow-on deals that have to adhere to restrictive floor
prices, the offering was launched at a fixed price of $12.17 per GDR, which
translated into Rs569.17 per common share listed on the National Stock
Exchange of India. The offer price was equal to the floor price and represented
a tight 1.9% discount to Monday’s closing price of Rs580.40. One
Luxembourg-listed GDR is equal to one common share and joint bookrunners
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India Infoline and Morgan Stanley used an exchange rate of 46.78 rupees to the
dollar.
While Cox and Kings was listed only in December last year, the stock is quite
liquid and the share price has had a strong run as investors see the travel
business as a way to play the country’s strong economic growth. By Monday’s
close, the share price had risen 75% since its debut on December 11, resulting in
a market capitalisation of about $780 million.
This also means that the deal accounted for only 8.3% of the outstanding share
capital, making it fairly easy for the market to absorb. However, hedge funds
were said to have shown little interest given that the shares were sold in the
form of GDRs. While the majority of Indian GDRs are typically converted back
into the more liquid common shares, it does take 15-20 days to do so, on top of
the T+5 settlement period – making it a somewhat risky proposition for a hedge
fund should the market move against it in the meantime.
Cox and Kings would have been prevented from selling new shares through a
qualified institutional placement (QIP) since those are only open to companies
that have been listed for at least one year.
The offer was launched after the Indian market closed on Monday and
completed before the opening yesterday to give local investors a proper chance
to participate. The company said it would use the money for acquisitions of
complementary businesses.
While relatively small in absolute dollar terms, the deal may have attracted
some additional interest since it came on the heels of a spectacular US trading
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debut by a second Indian travel specialist last week. The company, called
MakeMyTrip Limited, listed on Nasdaq on Thursday following a $70 million
initial public offering and surged 89% to a first day close of $26.45. The gains
came after the company had already priced the IPO at the top of the $12 to $14
offering range.
Again, investors were likely betting that the economic growth will lead to
increased travel by Indians and after two days of slight declines the stock rallied
another 29.5% last night to finish at $31.95 – up 128% from the IPO price.
MakeMyTrip is India’s largest online travel company, which appears to have
caught the attention of US investors. But their interest may also have been
boosted by the fact that MakeMyTrip, according to Bloomberg, was the first US
IPO by an Indian company since July 2006 when WNS Holdings raised $225
million. It is also only the fourth India-based company to go public in the US
since 1999.
In contrast, Cox and Kings fell 3.7% yesterday following the GDR sale to a
close of Rs559 – 1.8% below the GDR price. Compared with MakeMyTrip,
Cox and Kings is more of an old style travel agent with retail shops staffed by
travel experts. On the other hand, it does have subsidiaries in the UK, Australia,
New Zealand, Japan, the US, the UAE and Singapore and operates from
Moscow, the Maldives and Tahiti through branch offices and from Spain,
Sweden, Germany, Italy, France, South America and South Africa through
representative offices. This means it is benefitting not only from the increase in
travelling by Indians, but from the rising number of international travellers
going to India.
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Cox and Kings moves higher after launching GDR issue
Cox and Kings rose 1.19% to Rs. 587 at 9:38 IST after the company
launched a global depository receipts issue on Monday, 16 August 2010.
The announcement was made before trading hours today, 17 August 2010.
Meanwhile, the BSE Sensex was up 83.56 points, or 0.46%, to 19,134.41.
On BSE, 48,000 shares were traded in the counter as against an average daily
volume of 52,676 shares in the past one quarter.
The stock hit a high of Rs. 606.85 and a low of Rs. 585 so far during the day.
The stock had hit a record high of Rs. 659.70 on 11 August 2010 and a 52-
week low of Rs. 304.10 on 11 December 2009.
Travel company, Cox and Kings, has posted a 28 per cent increase in its
consolidated income from operations at Rs 107.30 crore in Q2 FY 11 as against
Rs 83.74 crore in the year-ago period.
Net profit before exceptional items stood at Rs 24.65 crore as compared to Rs
21.42 crore in the year-ago period.
The EBITDA for Q2 stood at Rs 48.79 crore as against Rs 36.90 crore in the
year-ago period.
During the quarter, the company raised USD 65 million through a GDR issue
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to fund largely its acquisition plans. The GDRs are listed on the Luxembourg
Stock Exchange.
Cox and Kings said the Global Depository Receipts (GDR) issue closes on
Tuesday, 17 August 2010. The firm has got in-principle approval to list the
GDRs on the Luxembourg Stock Exchange, it said in a statement.
The announcement was made before trading hours today, 17 August 2010.
Meanwhile, the BSE Sensex was up 83.56 points, or 0.46%, to 19,134.41.
On BSE, 48,000 shares were traded in the counter as against an average daily
volume of 52,676 shares in the past one quarter.
The stock hit a high of Rs 606.85 and a low of Rs 585 so far during the day.
The stock had hit a record high of Rs 659.70 on 11 August 2010 and a 52-week
low of Rs 304.10 on 11 December 2009.
Cox and Kings India Ltd ended up 9.6% after a report indicated that the
company is looking to raise $150 million through the GDR route, and the
money was likely to be used for acquisitions. The Cox and Kings board passed
an enabling resolution to raise up to Rs2,000 crore earlier.
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