e   rit     ar et in ndia   14.13
          Derivatives are securities under the SC(R)A    comply with Know Your Customer (KYC) norms
     and hence the trading of derivatives is governed    of respective companies. It also involves foreign
     by the regulatory framework under the SC(R)A        currency risks. IDR subscription and holding
     and are allowed to be traded on the floors of the   is just like any equity share trading on Indian
     stock exchanges.                                    exchanges and does not involve such hassels.
                                                              Stan Chart is the first and the only issuer of
     inDiAn DePository receiPts (iDrs)                   IDRs in Indian markets which came out with its
     As per the definition given in the Companies        IDR issue in May 2010 through which it had raised
     (Issue of Indian Depository Receipts) Rules, 2004,  Rs. 2,500 crore on high demand from institutional
     IDR is an instrument in the form of a depository    investors and was listed on the Bombay Stock
     receipt created by the Indian depository in India   Exchange and National Stock Exchange. Ten
     against the underlying equity shares of the issuing StanChart IDRs represent one underlying equity
     company. In an IDR, foreign companies would         of the UK-listed bank. StanChart IDRs were due
     issue shares, to an Indian depository [say the      to come up for redemption on 11 June, 2011.
     National Security Depository Limited (NSDL)],            SEBI came out with the new guidelines in June
     which would in turn issue depository receipts to    2011which ruled that after the completion of one
     investors in India. The actual shares underlying    year from date of issuance of IDRs, redemption
     IDRs would be held by an Overseas Custodian,        of the IDRs will be permitted only if the IDRs
     which shall authorise the Indian depository to      are infrequently traded on the stock exchange in
     issue of IDRs.                                      India. SEBI rules make it clear that if the annual
          Just try to understand in a simple way. An     trading turnover in IDRs in the preceding six
     IDR is a mechanism that allows investors in India   calendar months before redemption is less than
     to invest in listed foreign companies, including    5 per cent, then only the company could go into
     multinational companies, in Indian rupees. IDRs     for redemption of IDRs. The regulator had said
     give the holder the opportunity to hold an interest that the company issuing IDRs would have to
     in equity shares in an overseas company. IDRs are   test the frequency of trading the instrument on
     denominated in Indian Rupees and issued by a        the bourses on a half-yearly basis ending June and
     Domestic Depository in India. They can be listed    December every year.
     on any Indian stock exchange. Anybody who
     can invest in an IPO (Initial Public Offer) is/are  shAres ‘At PAr’ AnD ‘At Premium’
     eligible to invest in IDRs. In other words, what    An ordinary share in India, in general, is said to
     ADRs/GDRs are for investors abroad with respect     have a par value (face value) of Rs. 10, though
     to Indian companies, IDRs are for Indian investors  some shares issued earlier still carry a par value of
     with respect to foreign companies.                  Rs. 100. Par value implies the value at which a
          But one question comes in mind. How does       share is originally recorded in the balance sheet as
     investing in IDRs differ from investing in shares   ‘equity capital’ (this is the same as ‘ordinary share
     of foreign company listed on foreign exchanges?     capital’). SEBI guidelines for public issues by new
     Indian individuals can invest in shares of foreign  companies established by individual promoters
     companies listed on foreign exchanges only          and entrepreneurs, require all new companies to
     upto US$ 200,000 and the process is costly and      offer their shares to the public at par, i.e., at Rs.
     cumbersome as the investor has to open a bank       10. However, a new company set up by existing
     account and demat account outside of India and      companies (and of course existing companies