StanChart plans country's maiden IDR on May 25

Standard Chartered in Gurgaon, India

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Standard Chartered is likely to hit the markets with the country’s maiden Indian Depository Receipt issue on May 25, with an offering of securities worth around $600 million. The London-headquartered bank will issue around 240-million IDRs, with each share representing 10 IDRs. Sebi has approved the offering which now awaits clearance from the Registrar of Companies. Officials close to the transaction said the roadshows for the issue will begin from May 13 across 10 cities which will include the four metros as well as Bangalore, Surat, Ahmedabad, Hyderabad and Ludhiana. Roadshows could also happen in a couple of overseas locations like Singapore and Hong Kong, said officials. The issue will close on May 28.

The bank has hired UBS, Goldman Sachs, JM Financial Consultants, DSP Merrill Lynch, Kotak Mahindra Capital and SBI Capital Markets to manage the offering. The bank has raised the number of IDRs on offer from 220 million to 240 million, exercising an option which allows it to hike the issue by 10%. Unlike public issues of Indian companies, IDRs’ issue will not have any greenshoe option. The bank currently has 202.81 crore of outstanding shares. This issue is being seen as a test case by other multinationals who could follow suit with their own IDRs, depending on the response. StanChart, which opened its first Indian branch in Kolkata in 1858, is currently listed in the UK and Hong Kong. On Monday, shares were trading on the London Stock Exchange at around £17.46 (around Rs 1,175). The IDR is likely to be priced between Rs 100 and Rs 120. However, the bank would take a final call on the pricing of IDR closer to the issue opening.

Retail investors are likely to be offered a 5% discount. Officials close to the IDR said there was strong interest from anchor investors — both mutual funds and also a couple of foreign institutional investors. The bank had received interest of over $250 million, which is close to three times the $90-million investment limit for anchor investors. When contacted by ET, StanChart spokesperson refused to comment on the issue. According to the guidelines, no individual or an entity or group of entities, other than QIBs can hold IDRs exceeding 5% of the issue. QIB or a group of QIBs can hold up to 15% of the IDR issue. RBI norms do not allow banks to extend loans for subscribing to any IDR issue. IDR dividends are subject to tax unlike those of Indian companies which pay dividend distribution tax.

The bank had earlier this month in an interim statement said the group had a very strong start to the year, with both income and profit higher than in the first quarter of 2009. The bank releases only half yearly results. For the last calendar year, StanChart had reported a 13% rise in profits to $5.1 billion, driven by rising profits from Indian operations. The profit from Indian operations for the first time crossed the $1-billion mark to $1.06 billion for the year ended 2009 from $891 million a year ago. Profits were driven by a sharp rise in the corporate banking profit.  


1. How to apply?

Just like any IPO. ASBA facility also facility.

2. What are the minimum and maximum limit?

For retail investors – Minimum Rs.20,000 to Maximum of Rs. 1,00,000 .

Non- Institutional  Investors : Rs.100000 to Upto Issue Size

3. How IDR are traded?

IDRs will be allotted and traded in demat form in BSE and NSE. Investors can convert IDRs to underlying shares, one year after allotment, but, he has to sell the converted shares within 30days of the conversion. 

4. Tax treatment of IDRs

secondary trading of IDRs are not subjected to STT. Hence capital gain tax are applicable to trading profits. You also have to pay tax for dividend declared, if any.

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