Appendix 58
ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH DEPOSITORY RECEIPT MECHANISM) SCHEME, 1993
G.S.R. No. 700(E), dated 12‑11‑1993‑ Central Government hereby
notifies the following scheme, for facilitating issue of Foreign Currency
Convertible Bonds and ordinary shares through Global Depository Mechanism by
Indian Companies, namely:
1. Short title and
commencement
(1) This Scheme may be called the Issue of Foreign Currency Convertible Bonds
and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993.
(2) It shall be deemed to have come into
force with effect from the first day of April, 1992.
2. Definitions
In this scheme, unless the
context otherwise requires:
(a) "Domestic Custodian Bank"
means a banking company which acts as a custodian for the ordinary shares or
foreign currency convertible bonds of an Indian company which are issued by it
against global depository receipts or certificates;
(b) "Foreign Currency Convertible
Bonds" means bonds issued in accordance with this scheme and subscribed by
a non‑resident in foreign currency and convertible into ordinary shares
of the issuing company in any manner, either in whole, or in part, on the basis
of any equity related warrants attached to debt instruments;
(c) "Global Depository Receipts"
means any instrument in the form of a depository receipt or certificate (by
whatever name it is called) created by the Overseas Depository Bank outside
India and issued to non‑resident investors against the issue of ordinary
shares or Foreign Currency Convertible Bonds of issuing company;
(d) "Issuing company" means an
Indian company permitted to issue Foreign Currency Convertible Bonds or
ordinary shares of that company against Global Depositary Receipts;
(e) "Overseas Depositary Bank"
means a bank authorised by the issuing company to issue global depositary
receipts against issue of Foreign Currency Convertible Bonds or ordinary shares
of the issuing company;
(f) The words and expressions not defined in
the Scheme, but defined in the Income‑tax Act, 1961 (43 of 1961), or the
Companies Act, 1956 (1 of 1956), or the Securities and Exchange Board of India
Act, 1992 (15 of 1992), or the Rules and Regulations framed under these Acts,
shall have the meaning respectively assigned to them, as the case may be, in
the Income‑tax Act or the Companies Act, or the Securities and Exchange
Board of India Act.
(g) "a
software company" means a company engaged in manufacture or production of
software where not less than 80 per cent of the company's turnover is from
software activities;
(h) "information technology software
and information technology services" means the companies which deal with
such activities as defined in recommendation No. 19(a) and (b) of the
Notification dated 25th July, 1998 issued by the Planning Commission.
3. Eligibility for issue
of convertible bonds or ordinary shares of issuing company
(1) An issuing company desirous of raising
foreign funds by issuing Foreign Currency Convertible Bonds or ordinary shares
for equity issues through Global Depositary Receipt is required to obtain prior
permission of the Department of Economic Affairs, Ministry of Finance,
Government of India.
(2) An issuing company seeking permission
under sub‑paragraph (1) shall have a consistent track record of good
performance (financial or otherwise) for a minimum period of three years, on
the basis of which an approval for finalising the issue structure would be
issued to the company by the Department of Economic Affairs, Ministry of
Finance.
(3) On the completion of finalisation of
issue structure in consultation with the Lead Manager to the issue, the issuing
company shall obtain the final approval for proceeding ahead with the issue
from the Department of Economic Affairs.
Explanation
For the purposes
of sub‑paragraphs (2) and (3) "issue structure" means any of
the requirements which are provided in the paragraphs 5 and 6 of this Scheme.
(4) The Foreign Currency Convertible Bonds
shall be denominated in any convertible foreign currency and the ordinary
shares of an issuing company shall be denominated in Indian rupees.
(5) When an issuing company issues ordinary
shares or bonds under this scheme, that company shall deliver the ordinary
shares or bonds to a Domestic Custodian Bank who will, in terms of agreement,
instruct the Overseas Depositary Bank to issue Global Depositary Receipt or
Certificate to non‑resident investors against the shares or bonds held by
the Domestic Custodian Bank.
(6) A Global Depositary Receipt may be
issued in the negotiable form and may be listed on any international stock
exchanges for trading outside India.
(7) The provisions of any law relating to
issue of capital by an Indian company shall apply in relation to the issue of
Foreign Currency Convertible Bonds or the ordinary shares of an issuing company
and the issuing company shall obtain the necessary permission or exemption from
the appropriate authority under the relevant law relating to issue of capital.
3A. Information
Technology Software and Information Technology Services.‑ Indian companies engaged in
information technology software and information technology services are
eligible to offer to their non‑resident/resident permanent employees
(including Indian and overseas working directors) global depositary receipts
against the issue of ordinary shares under the scheme subject to the
operational guidelines/conditions issued from time to time by the Government.]
3B. Indian companies engaged in
Information Technology Software and Information Technology Services as defined
in recommendation No. 19(a) and (b) of the Notification‑‑dated 257‑1998
issued by the Planning Commission, are eligible to offer also to the non‑resideht/resi
dent permanent employees (including Indian and overseas working directors) of
their subsidiary companies, incorporated in India or abroad and engaged in
Information Technology Software and Information Technology Services, Global
Depository Receipts against the issue of ordinary shares under the Scheme
subject to the eligibility conditions and operational guidelines/
conditionalities announced from time to time by the Government.
4. Limits of foreign
investment in the issuing company
The ordinary
shares and Foreign Currency Convertible Bonds issued against the Global
Depositary Receipts shall be treated as direct foreign investment in the
issuing company. The aggregate of the foreign investment made either directly
or indirectly (through Global Depository Receipts Mechanism) shall not exceed
51 per cent of the issued and subscribed capital of the issuing company.
Provided that the investments made through Offshore Funds or by Foreign
Institutional Investors will not form part of the limit laid down in this
paragraph.
5. Issue structure of the
Global Depositary Receipts
(1) A Global Depositary Receipt may be
issued for one or more underlying shares or bonds held with the Domestic
Custodian Bank.
(2) The Foreign Currency Convertible Bonds
and Global Depositary Receipts may be denominated in any freely convertible
foreign currency.
(3) The ordinary shares underlying the
Global Depositary Receipts and the shares issued upon conversion of the Foreign
Currency Convertible Bonds will be denominated only in Indian currency.
(4) The following issues will be decided by
the issuing company with the Lead Manager to the issue, namely:
(a) public or private placement;
(b) number of Global Depositary Receipts to be issued;
(c) the issue price;
(d) the rate of interest payable on Foreign
Currency Convertible Bonds; and
(e) the conversion price, coupon, and the
pricing of the conversion options of the Foreign Currency Convertible Bonds.
(5) There would be no lock‑in‑period
for the Global Depositary Receipts issued under this scheme.
6. Listing of the Global
Depositary Receipts
The Global
Depositary Receipts issued under this scheme may be listed on any of the
Overseas Stock Exchanges, or Over the Counter Exchanges or through Book Entry
Transfer Systems prevalent abroad and such receipts may be purchased, possessed
and freely transferable by a person who is a non‑resident within the
meaning of section 2(q) of the Foreign Exchange Regulation Act, 1973 (46 of
1973), subject to the provisions of that Act.
7. Transfer and redemption
(1) A non‑resident holder of Global
Depositary Receipts may transfer those receipts, or may ask the Overseas
Depositary Bank to redeem those receipts. In the case of redemption, Overseas
Depositary Bank shall request the Domestic Custodian Bank to get the
corresponding underlying shares released in favour of the non‑resident
investor, for being sold directly on behalf of the nonresident, or being
transferred in the books of account of the issuing company in the name of the
non‑resident.
(1a) The Global Depository Receipts redeemed and
underlying shares sold in terms of 7(1) of the scheme may be re‑issued to
the extent of such redemption and sale made in the domestic market. Such re‑issuance
will be in terms of Foreign Exchange Management (Transfer or Issue of Security
by a Person Resident Outside India) Regulations, 2000 as amended from time to
time and the guidelines issue in this regard.
(2) In case of redemption of the Global
Depository Receipts into underlying shares, a request for the same will be
transmitted by the Overseas Depository Bank to the Domestic Custodian Bank in
India, with a copy of the same being sent to the issuing company for
information and record.
(3) On redemption, the cost of acquisition
of the shares underlying the Global Depository Rqceipts shall be reckoned as
the cost on the date on which the Overseas Depository Bank advises the Domestic
Custodian Bank for redemption. The price of the ordinary shares of the issuing
company prevailing in the Bombay Stock Exchange or the National Stock Exchange
on the date of the advice of redemption shall be taken as the cost of
acquisition of the underlying ordinary shares.
(4) For the purposes of conversions of
Foreign Currency Convertible Bonds, the cost of acquisition in the hands of the
non‑resident investors would be the conversion price determined on the
basis of the price of the shares at the Bombay Stock Exchange, or the National
Stock Exchange, on the date of convertion of Foreign Currency Convertible Bonds
into shares.
8. Taxation on Foreign
Currency Convertible Bonds
(1) Interest payments on the bonds, until
the conversion option is exercised, shall be subject to deduction of tax at
source at the rate of ten per cent.
(2) Tax on dividend on the converted portion
of the bond shall be subject to deduction of tax at source at the rate of ten
per cent.
(3) Conversion of Foreign Currency
Convertible Bonds into shares shall not give rise to any capital gains liable
to income‑tax in India.
(4) Transfer of Foreign Currency Convertible
Bonds made outside India by a non‑resident investor to another non‑resident
investor shall not give rise to any capital gains liable to tax in India.
9. Taxation on shares
issued under Global Depositary Receipt Mechanism
(1) Under the provisions of the Income‑tax
Act, income by way of dividend on shares will be taxed at the rate of 10 per
cent. The issuing company shall transfer the dividend payments net after
deducting tax at source to the Overseas Depositary Bank.
(2) On receipt of these payments of dividend
after taxation, the Overseas Depositary Bank shall distribute them to the non‑resident
investors proportionate to their holdings of Global Depositary Receipts
evidencing the relevant shares. The holders of the Depositary Receipts may take
credit of the tax deducted at source on the basis of the certification by the
Overseas Depositary Bank, if permitted by the country of their residence.
(3) All transactions of trading of the
Global Depositary Receipts outside India, among nonresident investors, will be
free from any liability to income‑tax in India on Capital Gains
therefrom.
(4) If any capital gains arise on the
transfer of the aforesaid shares in India to the non‑resident investor,
he will be liable to income‑tax under the provisions of the Income‑tax
Act. If the aforesaid shares are held by the non‑resident investor for a
period of more than twelve months from the date of advice of their redemption
by the Overseas Depositary Bank, the capital gains arising on the sale thereof
will be treated as long‑term capital gains and will by subject to income‑tax
at the rate of 10 per cent under the provisions of section II 5AC of the Income‑tax
Act. If such shares are held for a period of less than twelve months from the
date of redemption advice, the capital gains arising on the sale thereof will
be treated as short‑term capital gains and will be subject to tax at the
normal rates of income‑tax applicable to non‑residents under the
provisions of the Income‑tax Act.
(5) After redemption of the Depositary
Receipts into underlying shares, during the period, if any, which these shares
are held by the redeeming non‑resident foreign investor who has paid for
these shares in foreign exchange at the time of purchase of the Global
Depositary Receipt, the rate of taxation of income by way of dividends on these
shares would continue to be at the rate of 10 per cent, in accordance with
section 115AC(1) of the Income‑tax Act. The long term capital gains on
the sale of these redeemed underlying shares held by non‑resident
investors in the domestic market shall also be charged to tax at the rate of 10
per cent, in accordance with the provisions of section II 5AC(1).
(6) When the redeemed shares are sold on the
Indian Stock Exchanges against payment in rupees, these shares shall go out of
the purview of the section 115AC of the Income‑tax Act and income
therefrom shall not be eligible for the concessional tax treatment provided
thereunder. After the transfer of shares where consideration is in terms for
rupees payment, the normal tax rates would apply to the income arising or
accruing on these shares.
(7) Deduction of tax at source on the amount
of capital gains accruing on transfer of the shares would be made in accordance
with sections 195 and 196C of the Income‑tax Act.
10. Application
of avoidance of double taxation agreement in case of Global Depositary Receipts
(1) During the period of fiduciary ownership
of shares in the hands of the Overseas Depositary Bank, the provisions of
Avoidance of Double Taxation Agreement entered into by the Government of India
with the country of residence of the Overseas Depositary Bank will be
applicable in the matter of taxation of income from dividends from underlying
shares and interest on Foreign Currency Convertible Bonds.
(2) During the period, if any, when the redeemed
underlying shares are held by the non‑resident investor on transfer from
fiduciary ownership of the Overseas Depositary Bank, before they are sold to
resident purchasers, the Avoidance of Double Taxation Agreement entered into by
the Government of India with the
country of residence of the non‑resident investor will be applicable in
the matter of taxation of income from the dividends from the said underlying
shares, or interest on Foreign Currency Convertible Bonds, or any capital gain
arising out of transfer of underlying shares.
10. Gift tax and wealth tax
The holding of
the depositary receipts in the hands of non‑resident investors and the
holding of the underlying shares by the Overseas Depositary Bank in a fiduciary
capacity and the transfer of the Global Depositary Receipts between non‑resident
investors and the Overseas Depositary Bank shall be exempt from Wealth Tax
under the Wealth Tax Act, 1957 (27 of 1957), and from Gift Tax under the Gift
Tax Act, 1958 (18 of 1958).
1. Name of the Company &
Address for Communication
2. Existing Business
3. Profile
on Proposed Expansion/Diversification Project with breakup requirements of
Rupee and F.E. Components.
4. Existing Resources
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Year ending in March 1993
1992 1991 |
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Year ending in March 1993 1992 1991 |
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EQUITY (i) Authorised Capital (ii) Issued & paid up capital (iii)
Reservers & Surplus (a) General Reserve (b) Development Rebate Reserve (c) Investment
Allowance Reserve (d) Capital Reserve (e) Other Reserves |
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DEBT (i) Secured Loans (a)
Banks & Fls. (b)
Debentures (c)
Other loans (ii)
Unsecured Loans Deposits & Loans Deferred Liabilities (iii)
Current Liabilities Over-Draft from Banks and other short term borrowings. |
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5. Fixed Assets
I. (i) Gross
Block
(ii) Additions
and Accretions during the year
(iii) Depreciation
(iv) Net Block
II. WORK IN PROGRESS
Year
ending in March
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1993 |
1992 |
1991 |
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6. (i) Sales & Other income (ii) Operating Expeses (iii) Interest on Loans (iv) Profit before Depreciation (v) Depreciation (vi) Profit before Tax (vii) Provision for Taxation (viii) Profit Before Appropriations (ix) Dividend and other appropriations (x) Profit Transferred to General Reserves |
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7. Capacity and
Utilisation
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Products |
Year |
Units |
Installed Capacity P.A. |
Production during the year |
Capacity Utilisation precentage |
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8. Financial Results and management Ratios Year ending
in March
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1993 |
1992 |
1991 |
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(i) Net
Worth (ii) Capital
employed (iii) Capital‑turnover
ratio (iv) Equity‑Debt
Ratio (Long term) (v) Profitability (a) Profit margin (Net
Profit)/ (Income) x 100 % (b)
Return on equity (Net
Profit)/(Equity) x 100 (c)
Return on Net Worth (Net
Profit)/(Net Worth) x 100 (d)
Return on Total Investment (Net
Profit)/(Total Investment) x 100 (e)
Return on total capital employed (Net
Profit)/(Resources) x 100 (vi) Liquidity
Ratio Current
ratio = (Current Assets)/(Current Liabilities) (vii) Revenue
per worker for the year = (Income)/(Total Employment) 9. Statutory Liabilities (Disputed and otherwise) &
Defaults 10. Defaults in respect of interest/instalments to Loans from Banks/Financial
Institutions 11. Exports & Imports (a)
F.O.B. value Exports (b)
Exported to (Countries) (c)
Imports (i)
Capital Equipment (ii)
Materials, Components, Consurnables (d)
Other Foreign Currency Expenditure (e)
Foreign debt liabilities 12. Salient
features of the prospective corporate plans and diversification proposals
with special reference to foreign exchange requirements. |
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F.No.
Government of India
Ministry of Finance,
Department of Economic Affairs
(Investment Division)
New Delhi, Dated the
To
M/S
Subject: Your Application for a GDR/ADR/IDR issue for an amount of
Dear Sir,
I am directed to refer to
your letter No. ______ dated ______ on the subject mentioned above and to
convey Government of India's approval 'in principle' to the mobilisation of
foreign currency resources equivalent to ________ through issue of GDR/
ADR/IDRs to cover the Foreign Currency needs for your _______ projects and
other related corporate needs.
2. The approval is subject to the
understanding that the foreign currency resources raised through the proposed
issue should be mandatorily remitted to India immediately after the issue.
3. This approval is valid for a period of
six months from the date of issue of this letter.
4. You are now requested to finalise the
detailed parameters of the proposed GDR/ ADR/IDRs offering for consideration
and final approval by the Government of India.
Yours faithfully,
( ___________)
Director (Foreign
Investments)
Tel: _________
Issuer
Lead Manager
Co. Lead Manager(s)
Principal Amount
Currency
Issue price (& permium,
if any)
Coupon (& payment dates)
Conversion Premium
Maturity
Listing of Bonds
Optional Redemption by
Issuer (Cal)
Optional Redemption by
Investor (Put)
Form and Denomination
Status
Cross Default Provisions
Negative Pledge Provisions
Taxation
Commissions
Reimbursible Expenses
Governing Laws
Issuer
Lead Manager
Co. Lead Manager(s)
Overseas Depository
Institution
Indian Custodian
Issue Structure and
Denomination (No. of underlying shares represented by the GDRs).
Issue Amount (Principal
amount)
Greenshoe Option (Additional
amount in % terms which may be retained if offered)
Warrants attached, if any
Currency of issue
G.D.R. Listing
Underlying Shares Listing
Standstill period (No
further equity shares, or interests in equity shares, for a specified time
period from the date of issue)
Trading provision
Settlement provisions
Selling Commission
Underwriting Commission and
Management Fees
Legal Expenses, Printing
Expenses, Depository Fees, and other out of pocket expenses.
Taxation
Governing Laws.
[Issued by the Ministry qf
Finance, Department of Econontic Affairs vide No. S‑11(25) CCI-II/89/NRI
dated 12‑11‑1993]
OPERATIVE GUIDELINES FOR THE LIMITED TWO‑WAY FUNGIBILITY UNDER
THE ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH
DEPOSITORY RECEIPT MECHANISM) SCHEME, 1993
February 13, 2002
(a) Reissuance of ADR/GDR would be permitted
to the extent of ADRs/GDRs which have been redeemed into underlying shares and
sold in the domestic market. The arrangement is demand driven with the process
of re‑conversion emanating with the request for acquisition of domestic
shares by non‑resident. investor for issue of ADRs/GDRs.
(b) Investments under the Foreign Currency
Convertible Bonds and Ordinary Shares (Through Depository receipt Mechanism)
Scheme, 1993 are treated as direct foreign investment. Accordingly, the
transaction tinder the reconversion arrangenient will be distinct and separate
from Fit portfolio investments.
(c) The transaction will be effected through
the Securities and Exchange Board of India (SEBI) registered stockbrokers as
intermediaries between foreign investors and domestic shareholders. A general
permission has been conveyed by the Reserve Bank of India (RBI) through
Notification No. FEMA.41/2001 ‑RB, dated 2nd march, 2002, authorising
such stockbrokers to acquire domestic shares on behalf of the overseas
investors for being placed with the domestic Custodian.
(d) For this purpose all SEBI registered
brokers will be able to act as intermediary in the two way fungibility of
ADRs/GDRs. The RBI has conveyed general permission through Notification No.
FEMA.41/2001‑RB, dated 2nd March, 2001, for these brokers to buy shares
on behalf of the overseas investor.
(e) As a secondary market transaction, the
acquisition of such shares through the intermediary on behalf of the overseas
investors would fall within the regulatory purview of the SEBI. The Custodian
would monitor the reissuance and furnish a certificate to both the RBI and SEBI
to ensure that the sectoral caps are not breached. The RBI would monitor the
receipt of certificates from the Custodian to this effect.
(f) The domestic Custodian who is the
intermediary between overseas depository on the one hand and Indian company on
the other will have the record of the ADRs/GDRs issued and redeemed and sold in
the domestic market.
(g) The domestic Custodian will also be
required to ascertain the extent of registration in favour of ADR/GDRs
holders/non‑resident investor based on the advice of overseas depository
to the domestic Custodian for the underlying shares being transferred in the
books of account of the issuing company in the name of the non‑resident
on redemption of the ADRs/GDRs.
(h) The Custodian is also required to verify
with the Company Secretary/ NSDL/CDSL if the total cap is being breached if
there is a percentage cap on foreign direct investment.
(i) On request by the overseas investor for
acquisition of shares for reissuance of ADRs/GDRs, the SEBI registered broker
will purchase a given number of shares after verifying with the Custodian
whether there is any Head Room available:
(j) Head Room = Number of ADRs/GDRs
originally issued minus number of GDRs outstanding further adjusted for
ADRs/GDRs redeemed into underlying shares and registered in the name of the non‑resident
investor(s). The domestic Custodian would notify the extent up to which
reissuance would be permissible‑the redemption effected minus the
underlying shares registered in the name of the non‑resident investor
with reference to original GDR issue and adjustment on account of sectoral
caps/approval limits.
(k) The Indian broker would receive funds
through normal banking channels for purchase of shares from the market. 'Me
shares would be purchased in the name of the overseas depository and the shares
would need to be purchased on a recognized stock exchange.
(l) Upon acquisition the Indian broker
would place the domestic share with the Custodian; the arrangement would
require a revised custodial agreement under which the Custodian would be
authorized by the company to accept shares from entities other than the
company.
(m) The Custodian would advise overseas
depository on the custody of domestic share and that corresponding ADRs/GDRs
may be issued to the non‑resident investor.
(n) Overseas depository would issue
corresponding ADRs/GDRs to the investor.
(o) The domestic Custodian in addition would
have to ensure that the advices to the overseas depository are issued on the
first come first serve basis i.e., the first deposit of domestic/underlying
shares with a custodian shall be eligible for the first reissuance of ADRs/GDRs
to the overseas investors.
(p) The Custodian would also have to ensure
that ordinary shares only to the extent of the depletion in ADRs/GDRs stock are
deposited with it. This can be readily ensured by adopting a system similar to
the trigger mechanism adopted for FIIs. Once the trigger mechanism is reached,
say at 90 per cent. of the depletion in the ADR/GDR stock, each buying
transaction of domestic shares would be complete only after the Custodian has
approved it.
(q) A monthly report about the ADR/GDR
transaction under the two‑way fungibility arrangement is to be made by
the Indian Custodian in the prescribed format to the RBI and SEBI.
(r) The
broker has to ensure that each purchase transaction is only against delivery
and payment thereof is received in foreign exchange.
(s) The broker will submit the contract not
to the Indian Custodian of the underlying shares on the day next to the day of
the purchase so that the custodian can reduce the Head Room accordingly. Copy
of the Contract Note would also need to be provided by the custodians to the
RBI and SEBI. The broker will also ensure that a separate rupees account will
be maintained for the purpose of buying shares for the purpose of effecting two‑way
fungibility. No forward cover will be available for the amounts lying in the
said rupee account. The ADRs will be permitted to transfer the monies lying in
the above account on the request of the broker.
(t) The Custodian of the underlying shares
and the depositories would co‑ordinate on a daily basis in computing the
Head Room. Further, the company secretary of each individual company would
provide details of non‑resident investment at weekly intervals to the
custodian and the depository. The custodian would monitor the reissuance and
furnish a certificate to both the RBI and SEBI, to ensure that the sectroal
caps are not breached, The RBI would monitor the receipt of certificates from
the Custodian to this effect.
(u) The reissuance would be within the
already approved/issued limits and would only effectively mean transfer of
ADRs/GDRs from one non‑resident to another and accordingly no further
approval mechanism be insisted upon.
(v) In the limited two‑way fungibility
arrangement, the company is not involved in the process and is demand drive,
i.e., request for ADRs/GDRs emanates from overseas investors. Consequently, the
expenses involved in the transaction would be borne by the investors, which
would include the payments due to overseas intermediary/broker, domestic
Custodians, charges of the overseas and domestic brokers.
(w) The tax provision under section 115AC of
the Income‑tax Act, 1961, which is applicable to non‑resident
investors investing in ADRs/GDRs offered against issue of fresh underling
shares would extend to non‑resident investors investing in foreign
exchange in ADRs/GDRS issued against existing shares under these guidelines, in
terms of the relevant provisions of the Income‑tax Act, 1961.