Companies (Issue of Indian Depository Receipt) Rules, 2004 were notified by the Government of India on February 20, 2004 to enable foreign issuers to raise funds from the Indian Financial Markets in the form of Indian Depository Receipts (IDRs). The disclosure requirements are to be laid down by SEBI for IDR issuers as per these rules.
In this regard, suggested disclosure requirements as given below are placed for public comments for a period of 21 days i.e. from July 29, 2004 to August 19, 2004
Comments/suggestions on the disclosure requirements may be sent to Shri Parag Basu Deputy General Manager, Division of Issues and Listing-II, SEBI or to Shri Pradeep Ramakrishnan, Manager, SEBI or emailed to paragb@sebi.gov.in / pradeepr@sebi.gov.in or faxed to 91-22-22045633 on or before August 19, 2004.
SUGGESTED DISCLOSURES FOR AN OFFER DOCUMENT FOR ISSUE OF INDIAN DEPOSITORY RECEIPTS (IDRs)
ADDITIONAL ELIGIBILITY FOR ISSUE OF IDRS
An issuing company may issue IDRs only if it satisfies the following conditions:-
(a) The company proposing to issue IDRs should not have been prohibited to issue securities by the applicable Regulatory Body.
(b) It should have good track record with respect to compliance with Securities market regulations
INVESTORS
An issue of IDRs would be open only to the investors who can be classified as Qualified Institutional Buyers as defined in the SEBI (DIP) Guidelines and to investors who invest Rs.5,00,000/- or more in such issues.
MINIMUM ISSUE SIZE:
The minimum size of an IDR issue should not be less than Rs.50 crores.
MINIMUM SUBSCRIPTION:
If the company does not receive the minimum subscription of 90% of the issued amount on the date of closure of the issue, or if the subscription level falls below 90% after the closure of issue on account of cheques having being returned unpaid or withdrawal of applications, the company shall forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after the company becomes liable to pay the amount, the company shall pay interest at the rate of 15% per annum for the period of delay.
DISCLOSURE FORMAT: -
- The contents of the offer document including the financial statements of the issuer company, its subsidiaries and affiliates shall be in plain English.
- The offer document shall contain all material information which shall be true and adequate so as to enable the investors to make informed decision on the investments in the issue.
- The offer document shall also contain the information and statements specified herein
- The draft offer document and final offer document shall be approved by the Board of Directors of the issuer company and signed by all the Directors (including the Managing Director), Chief Executive Officer and Chief Financial Officer of the issuer company. They shall also certify that all the disclosures made in the offer document are true and correct.
DISCLOSURES
I. THE ISSUE
- Summary of the terms of offer
II. FORWARD LOOKING STATEMENTS
A paragraph on forward looking statements shall be Included in the offer document
III. GENERAL INFORMATION
- Name and address of the registered office of the company;
- Name and address of the Domestic Depository, the Overseas Custodian Bank with the address of its office in India, the Merchant Banker, the underwriter to the issue and any other intermediary which may be appointed in connection with the issue of IDRs;
- Names and addresses of Stock Exchanges where applications are made or proposed to be made for listing of the IDRs;
- provisions relating to punishment for fictitious applications;
- statement/declaration for refund of excess subscription
- declaration about issue of allotment letters/certificates/ IDRs within the stipulated period;
- date of opening of issue;
- date of closing of issue;
- date of earliest closing of the issue;
- declaration by the Merchant Banker with regard to adequacy of resources of underwriters to discharge their respective obligations, in case of being required to do so;
- a statement by the issuing company that all moneys received out of issue of IDRs shall be transferred to a separate domestic bank account, name and address of the bank and the nature and number of the account to which the amount shall be credited;
- details of availability of prospectus and forms, i.e., date, time, place etc;
- amount and mode of payment seeking issue of IDRs
IV. RISK FACTORS
- Risk factors associated with the company’s business
- Risk factors associated with the country of the company proposing to issue IDRs
- Risk factors associated with the IDRs / underlying shares
V. RECENT DEVELOPMENTS
- Important events in the recent past (2 FY preceding the issue) providing details of important developments on 3 key areas: Operations & Management, Shareholding patterns and Business Environment
VI. MATERIAL DEVELOPMENTS SUBSEQUENT TO THE DATE OF THE LAST FINANCIAL STATEMENTS AS DISCLOSED IN THE PROSPECTUS
- An undertaking by the directors whether in their opinion there have arisen any circumstances since the date of the last financial statements as disclosed in the prospectus any which materially and adversely affect or is likely to affect the trading or profitability of the company, or the value of its assets, or its ability to pay its liabilities within the next twelve months.
VII. MARKET PRICE INFORMATION AND OTHER INFORMATION CONCERNING THE SHARES IN THE DOMESTIC MARKET OF THE ISSUER AND THE IDRs, AS THE CASE MAY BE
- Market price of shares for each quarter of the last three calendar years preceding the calendar year preceding the year of the issue of Prospectus (High, Low, Average Daily Trading Volume)
- Market price of shares for each month of the calendar year preceding the year of the issue of Prospectus (High, Low, Average Daily Trading Volume)
- Market price of shares for the month preceding the date of Prospectus (High, Low, Average Daily Trading Volume)
- The Closing price on the last day of the preceding month of the date of Prospectus along with the volume
VIII. DIVIDENDS
- Dividend policy of the Company
- Rate of Dividend and Amount of Dividend paid for the last five financial years
- Regulatory framework in the Country of Incorporation/share listed concerning Dividends
- Details of Arrangement with the Depositories for payment of Dividend to the IDR holders
IX. EXCHANGE RATES
- Brief history of the pattern of Exchange rates between the Country of Incorporation/share listed and India
- High, Low, Average Rates for the last five years
- High, Low, Average Rates for the last twelve months
X. FOREIGN INVESTMENT AND EXCHANGE CONTROLS OF THE COUNTRY OF INCORPORATION/SHARE LISTED
- Information relating to the foreign investment laws and exchange control regulations of the Country of Incorporation/share listed.
XI. OBJECTS OF THE ISSUE / USE OF PROCEEDS
- Purpose of the Issue
- Cost break-up of the proposed Activities
- Means of financing
- Deployment status
XII. CAPITALISATION STATEMENT
As prescribed under the SEBI (DIP) Guidelines
XIII. CAPITAL STRUCTURE
- Authorised issued subscribed and paid up capital (Number of instruments, description, aggregate nominal value)
- Size of present issue giving separately firm allotment / reservation for specified categories and net offer to public.
- Paid-up Capital
- after the issue
- after conversion of securities (if-applicable)
- Share Premium Account (before and after the issue)
- details regarding major shareholders:-
- the person or persons who are in over-all control of the company and their shareholding.
XIV. FINANCIAL INFORMATION
- Report of the statutory auditor on the financial results and financial status of the company up to a period not being more than 120 days before the opening of the issue, wherever statutory audit is required under the law of the country in which the issuing company is incorporated;
- A report by the statutory auditor, on profits or losses of the issuing company for each of the five financial years immediately preceding the issue of prospectus and on the assets and liabilities of the issuing company at the last date to which the accounts of the company were made in the specified form; provided that the gap between date of issue and date of report shall not be more than 120 days;
- A report by domestic depository, as certified by an Accountant who is member of Institute of Chartered Accountants of India holding certificate of practice, upon profits or losses of the issuing company for each of the five financial years immediately preceding the issue of prospectus and upon the assets and liabilities of the issuing company at the last date to which the accounts of the company were made in the specified form; provided that the gap between date of issue and date of report shall not be more than 120 days and
- The above report can be made on the basis of Indian GAAP or IAS/IFRS with para on summary of significant differences between Indian GAAP and IAS/IFRS
- The above report needs to be stated on Consolidated Basis as well as stand alone basis
- The above reports needs to be stated in Indian Rupees in addition to home country currency
- If the proceeds of the IDR issue are used for investing in other body(ies) corporate, then following details of such body(ies) corporate shall be given :
a) Name and address(es) of the bodies corporate;
b) The reports as stated above in respect of those bodies corporate also.
Audited Consolidated Financial Statements prepared in accordance with Indian GAAP and IFRS:
Report of Independent Auditors on the Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Statement of Accounting Policies
Notes to Consolidated Financial Statements
Unaudited Interim Consolidated Financial Statements prepared in accordance with Indian GAAP and IFRS:
Review Report of Independent Auditors on the Unaudited Interim Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets
Unaudited Condensed Consolidated Statements of Income for the period
Unaudited Condensed Consolidated Statements of Cash Flows for the period
Audited Unconsolidated Financial Statements prepared in accordance with Issuer country GAAP:
Report of Independent Auditors on the Unconsolidated Financial Statements
Unconsolidated Balance Sheets
Unconsolidated Statements of Income
Schedules to the Unconsolidated Financial Statements
Annexure to Schedule IV to the Unconsolidated Financial Statements
Unconsolidated Statements of Cash Flows for the years
Statement Relating to Subsidiary Companies
XV. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN THE GAAP OF THE ISSUER’S COUNTRY AND IFRS/INDIAN GAAP
XVI. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL STATEMENTS
XVII. INDUSTRY AND BUSINESS OVERVIEW
- Market including details of the competition, past production figures for the industry, existing industry capacity, past trends and future prospects regarding exports (if, applicable), demand and supply forecasts (if given, should be essentially with assumptions unless sourced from a market research agency of repute), etc. to be given. Source of data used shall be mentioned.
XVIII. COMPANY
- Main object, history and present business of the company;
- location of the project, if any;
- Installed capacity and the details of plant and machinery, infrastructure facilities, technology etc., where applicable;
- schedule of implementation of project and progress made so far, if applicable;
- nature of product(s), consumer(s), industrial users;
- particulars of legal, financial and other defaults, if any;
- Underwriting
- Experts
- Where You Can Find Additional Information
- Enforcement of Civil Liabilities Against Foreign Persons
XIX. SUBSIDIARIES AND AFFILIATES
- The following information for the last 3 years based on the audited statements in respect of subsidiaries and affiliates of the Issuing Company:
a. Date of Incorporation;
b. Nature of activities;
c. Equity Capital;
d. Reserves (excluding revaluation reserve);
e. Sales;
f. Profit after tax (PAT);
g. Earnings per share (EPS); and
h. Net Asset Value (NAV);
If the subsidiaries and affiliates are not required to prepare such audited statements as per the laws prevailing in those countries, the same may be certified as true and correct by the Board of Directors and the management of such companies, provided a certificate from the accountant practicing in the concerned country is submitted to SEBI.
XX. MANAGEMENT
- Controlling shareholders and their Background
- Details of the Board of Directors and the Key Managerial Personnel (i.e. Name, address(es) of Directors, Manager, Managing Director or other principal officers of the company, age, qualification, industry experience, other directorships)
XXI. SECURITIES MARKET OF THE COUNTRY OF INCORPORATION/SHARE LISTED
- Brief History
- Stock Exchange Regulation
- Listing Regulations
- Details of the Securities market regulator of the country of the issuer company
- Whether the Securities market regulator of the country of the issuer company has signed any MoU with SEBI
- Disclosure under the Companies Act and Securities Regulations (or equivalent thereof)
- Stock Exchanges
- Takeover Code/Buyback Code
Reforms in Some Key Sectors of the Economy
Restriction on Foreign Ownership of Securities
Overview of the Financial Sector
Nature of the Securities Trading Market in that country
XXII. DESCRIPTION OF THE INDIAN DEPOSITORY RECEIPTS
- Brief description of the Indian Depository Receipts
- Dividends, Other Distributions and Rights
- Record dates
- Voting Rights
- Reports and other communication
- Conversion procedure of IDR into Shares
- Governing Law
XXIII. PROVISIONS REGARDING TRANSFER OF SHARES AND DEPOSITORY RECEIPTS
- Provision regarding transfer of IDRs
- Provision regarding transfer of Shares
- Settlement system of Shares and IDRs
XXIV. INFORMATION RELATING TO THE DEPOSITARY
- Brief details of the Depositary and Depositary Agreement
XXV. DESCRIPTION OF SHARES
- Information relating to the share capital of the Issuer, including brief summaries of certain provisions of the Articles of Association, the Corporate Act and related legislation of the Country of Incorporation/share listed.
XXVI. APPROVALS OF THE GOVERNMENT/REGULATORY AUTHORITIES OF THE COUNTRY OF INCORPORATION
- Information relating to statutory approvals required for the Issue and the related aspects and their status, including approvals from Indian Regulatory authorities.
XXVII. TAXATION FRAMEWORK IN INDIA AND THE COUNTRY OF INCORPORATION / SHARE LISTED
- Information relating to Taxation law, Tax Treaties
XXVIII. OUTSTANDING LITIGATIONS AND DEFAULTS
XXIX. BASIS OF ISSUE PRICE
- As per DIP Guidelines
- Key financial ratios to be provided in support along with the industry comparison
XXX. MAIN PROVISIONS OF ARTICLES OF ASSOCIATION / MAIN CHARTER OF THE ISSUER
XXXI. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
Place at which inspection of the offer documents, the financial statements and auditor's report thereof will be allowed during the normal business hours.
XXII. OTHER INFORMATION
- Mandatory vetting of the Offer Document by the legal counsel to the Issuer operating at the place where the registered office of the Issuer is situated.
- Consent of Merchant Bankers, overseas custodian bank, the domestic depository and all other intermediaries associated with the issue of IDRs.
- Minimum subscription for the issue.
- Fees and expenses payable to the intermediaries involved in the issue of IDRs