EURO ISSUE

Euro Issue *

Government of India have been permitting Indian companies to issue Equity and Equity related instruments to international investors in the form of Global Depository Receipts (GDRs) and Convertible Bonds. A detailed Notification was also issued on November 12, 1993 outlining the scheme for the issue of Foreign Currency Convertible Bonds (FCCBs) and ordinary shares (through Depository Receipt Mechanism). Government have since reviewed the working of the scheme and the following further guidelines have been formulated in this regard :

(a) For the present it is proposed to follow a restrictive policy towards Foreign Currency Convertible Bonds since such Bonds form part of the country’s external debt till their conversion into equity. However, companies will be allowed on merits to issue FCCBs as part of a programme of restructuring of external debt which helps to lengthen maturity and soften terms.

(b) Euro Issues will be treated as direct foreign investments. Accordingly, a company contained in Annexure III of the New Industrial Policy of 1991 whose direct foreign investment after a proposed Euro Issue is likely to exceed 51%, or which is implementing projects not predominantly contained in Annexure III, would need to obtain prior FIPB clearance before final approval for the Euro Issue is given by the Finance Ministry.

(c) For the purpose of ensuring that as many companies as possible avail of this scheme, only one issue per company in a financial year will be permitted with a minimum gap of twelve months between two issues by the same company and not more than two issues will be permitted for any group of companies in a financial year.

(d) Both the in-principle and final approvals will be valid only for three months from the dates of their respective issue.

(e) Requests for retention of the Issue proceeds abroad will be considered on specific application, for import of capital goods, retiring foreign currency debts, capitalising Indian joint ventures, etc., and projects abroad.

(f) GDR issues would be permitted only for the following end-use to be incurred within one year from the date of issue:

(i) Financing capital goods imports;

(ii) Financing domestic purchase/installation of plant, equipment and buildings;

(iii) Pre-payment or scheduled repayment of earlier external borrowing;

(iv) Making investments abroad where these have been approved by competent authorities;

(v) A margin of 15% of the total proceeds of an issue for other general corporate restructuring uses;

(g) Companies would be required to submit quarterly statement of utilisation of funds duly certified by their auditors;

(h) The policy and guidelines for Euro Issues will be subject to review every three months.

Source : Press Note, dated 11-5-1994, issued by the Department of Economic Affairs (Investment Division), Ministry of Finance, Government of India.

Clarification 1

Fresh Guidelines for Euro Issues : 1994-95

The Guidelines for Euro Issues - 1994-95 were announced by the Government of India on 11th May, 1994. At that time it was indicated that the guidelines would be reviewed periodically. During the first half of the Fiscal Year Indian companies have mobilised in excess of US $ 1 billion through issue of GDRs and Euro Convertible Bonds. This indicates a healthy and sustained interest by overseas investors. The guidelines have been reviewed on the basis of experience in this period and various representations received. The following modifications are being made :

(a) The guidelines had stipulated that Euro Issues would be permitted only for certain specific end-uses to be incurred within one year from the date of issue. Several representations have been received by the Government requesting review of the stipulation that the Euro Issue proceeds should be utilised for the approved end-uses within a period of one year from the date of issue on the plea that capital expenditure projects often have a long gestation period and that it would be difficult for companies to comply with the one year restriction. These representations have been considered and the guidelines are being modified to remove the stipulation that Euro Issue proceeds should be utilised for the approved end-uses within a period of one year from the date of issue. Instead, issuing companies would be required mandatorily to retain the Euro Issue proceeds abroad to be repatriated as and when expenditure for the approved end-uses (including up to 15% earmarked for general corporate restructuring uses) are incurred. This will enable companies to tap make to abroad for approved purposes while also avoiding monetary expansion as a consequence of Euro Issue inflows in advance of the need for funds. This requirement will be added to all final approvals given henceforth. Information regarding periodic repatriation of Euro Issue proceeds into the country and the manner of their deployment for the approved end-uses should be furnished in detail in the quarterly statements that the issuing companies are required to submit to the Government at the end of every calendar quarter duly vetted by the auditors.

(b) A relaxation of the approved end-use criteria will be allowed to enable select All India Financial Institutions to access the Euro market considering the multiplier effect and generally beneficial impact for small and medium industries who are unable themselves to access the Euro market.

Source : Press Note [S-11(25)/CCI-MF 89-NRI], dated 28-10-1994.

Clarification 2

Modification of Euro Issue Guidelines regarding retention of funds abroad

Guidelines for Euro Issue for 1994-95 were announced by the Government of India on 11-5-1994, followed by certain amendments on 28-10-1994. In terms of the guidelines dated 28-10-1994, issuing companies were required mandatorily to retain the Euro Issue proceeds abroad to be repatriated as and when expenditure for the approved end-uses (including up to a maximum of 15 per cent of funds earmarked for general corporate restructuring uses) were incurred. It has now been decided to permit the issuing companies to also retain the Euro Issue proceeds as foreign currency deposits with Banks and Public Financial Institutions in India, which can be converted into Indian Rupees only as and when expenditure for the approved end-uses (including up to a maximum of 15 per cent of funds earmarked for general corporate restructuring uses) are incurred. The interim deployment of funds, retained abroad or as foreign currency deposits with Banks and Public Financial Institutions in India, should conform to the manner of deployment that will be indicated by RBI in their approval letter.

Source : Press Note No. S-11(25)/CCI-II/89-NRI, dated 24-5-1995, issued by the Department of Economic Affairs, Ministry of Finance.

Clarification 3

Modification of Euro Issue Guidelines

Government of India had notified a Scheme in November 1993, for issue of Foreign Currency Convertible Bonds and Ordinary Shares through Depository Receipt Mechanism. Revision/modifications in the operative guidelines are being announced from time to time. On the basis of the periodic review and assessment of current situation, the following modifications are announced to the existing Euro issue guidelines:

(i) The guidelines of 28-10-1994 provided that the Euro Issue proceeds were to be mandatorily retained abroad by the issuer companies to be repatriated as and when expenditure on approved project/end uses were incurred. This requirement was partially modified through a Press Release dated 24-5-1995 providing option to the issuing companies to also keep funds in foreign currency deposits with Banks and Public Financial Institutions in India to be converted into Indian rupees as and when expenditure on approved end uses were incurred. In relaxation of the above requirement, companies will now be permitted to remit funds into India in anticipation of the use of funds for approved end uses.

(ii) The existing ceiling for use of issue proceeds for general corporate restructuring including working capital requirement is revised from 15 per cent to 25 per cent of the GDR issue.

(iii) At present only companies having a consistent track record of good performance (financial or otherwise) for a minimum period of three years are allowed to issue GDRs/FCCBs. In view of the importance of the infrastructure projects, and the need to encourage equity financing of such projects, the three-year track record will be relaxed in case of companies seeking GDR/FCCB issues to finance investment in infrastructure industries such as power generation, telecommunication, petroleum exploration and refining, ports, airports, roads.

(iv) Currently corporates are permitted to access foreign capital market for External Commercial Borrowing through instruments like FRN and fixed rate bonds. In order to enable corporates to tap a wider spectrum of the market, they would also be permitted to structure their borrowings as a FCCB. The end-use of funds through a FCCB should conform to the norms prescribed by Government for ECB from time to time. While the time frame for conversion of FCCB is flexible, the non-converted portion should have a minimum average tenor of five years.

Source : Press Note [F. No. S. 11(25)/CCI-II/89/NRI], dated 25-11-1995, issued by the Department of Economic Affairs, Foreign Trade and Investment Division, Ministry of Finance.

Clarification 4

Conditions subject to which authorised dealers/public financial institutions are to accept foreign deposits from Indian Companies out of Euro Issue proceeds

1. At present Indian companies going in for Euro Issues, viz., global depository receipts/foreign currency convertible bonds (GDRs/FCCBs) are required mandatorily to retain the proceeds of such issues abroad to be repatriated to India as and when the expenditure for the approved end uses is incurred. Such funds could be kept abroad either with foreign banks which are rated for short-term obligations as A 1 + by Standard & Poor or P 1 by Moody’s, or Branches of Indian banks as deposits or invested in treasury bills and other monetary instruments with maturities not exceeding one year.

2. In terms of the revised “Guidelines for Euro Issues” issued by Government of India on 24th May, 1995 the companies going for Euro Issues will now have the option of retaining the proceeds of Euro Issues abroad as indicated in paragraph 1 above or keeping the issue proceeds in foreign currency deposits with authorised dealers and/or public financial institutions in India holding authorisation from Reserve Bank to deal in foreign exchange.

3. Accordingly, it would be in order for authorised dealers/public financial institutions to accept foreign currency deposits from Indian companies out of Euro Issue proceeds subject to the following conditions:

(i) The foreign currency deposits would carry interest at a rate not exceeding LIBOR for the respective period for which the deposit is accepted.

(ii) The authorised dealers/public financial institutions with whom the foreign currency deposits are kept should not swap the foreign currency for rupees but use the amounts for lending in foreign currency to eligible clients.

(iii) The authorised dealers may also invest surplus foreign currency out of such Euro issue proceeds as permitted in paragraph 5B.9 of the Exchange Control Manual subject to the condition indicated in (ii) above.

(iv) The authorised dealers/public financial institutions accepting the foreign currency deposits would be eligible to charge interest at the rate not exceeding 2.5 per cent over six months LIBOR for lending out of such funds.

(v) The authorised dealers will be required to maintain a cash reserve ratio of 7.5 per cent on such deposits.

(vi) The deposits can be converted into Indian rupees only as and when expenditure for approved end uses (including up to maximum of 15 per cent of the proceeds earmarked for general corporate restructuring uses) are incurred by the issuer company.

(vii) The authorised dealers/public financial institutions accepting such deposits as also the issuer company, as the case may be, should also comply with the conditions stipulated by Government of India in their approval letters for such issues.

Source : AD (GP Series) Circular No. 6, dated 20-7-1995.

Clarification 5

Fresh guidelines for Euro issues

1. A Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) was notified by the Government of India in November 1993. Revisions/modifications in the operative guidelines for Euro Issues are announced from time to time.

2. On the basis of the periodic review and assessment of the current situation, the following Euro Issue guidelines, in continuation of the notification of November 1993, shall come into effect for approvals granted on, or after the date of issue of these guidelines, in supersession of all the previous guidelines on the subject.

Track record :

3. An issuing company seeking permission for raising foreign funds by Euro Issues having a consistent track record of good performance (financial or otherwise) for a period of three years shall be allowed to issue GDRs/FCCBs.

4. In view of the importance of the infrastructure project, and the need to encourage equity financing of such projects, the three-year track record requirement would be relaxed in the case of companies seeking GDR/FCCB issues to finance investments in infrastructure industries such as power generation, telecommunication, petroleum exploration and refining, ports, airports and roads.

Approvals :

5. Euro Issues shall be treated as direct foreign investment (subject to extant policies governing direct foreign investments) in the issuing company. Accordingly, a company which is implementing projects not predominantly contained in Annexure III of the New Industrial Policy of 1991, or a company which undertakes a project contained in Annexure III but whose direct foreign investment after the proposed Euro-Issue is likely to exceed 51 per cent of the post-issue subscribed capital, will need to obtain prior FIPB clearance before final approval to the Euro-Issue is given by the Finance Ministry.

Number of issues :

6. 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.

End-use : GDRs :

7. In relaxation of earlier guidelines, GDR end-uses will include—

- financing capital goods imports ;

- capital expenditure including domestic purchase/installation of plant, equipment and buildings and investments in software development ;

- pre-payment of scheduled repayment of earlier external borrowings ;

- investments abroad where these have been approved by competent authorities ;

- equity investment in JVs/WOSs in India.

8. However, investments in stock markets and real estate will not be permitted.

9. Within this framework, GDR raising companies will be allowed full flexibility in deploying the proceeds.

10. 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.

11. However, banks, FIs, and Non-banking Finance Companies (NBFCs) registered with RBI will be eligible for GDR issues without reference to the end-use criteria mentioned in paras 7 to 10 above with the restriction that investments in stock markets and real estate will not be permitted.

12. A company shall be required to specify the proposed end-uses of the issue proceeds at the time of making their application, and will be required to submit quarterly statement of utilisation of funds for the approved end-uses, duly certified by their auditors.

End-use-FCCBs :

13. Currently, companies are permitted to access foreign capital market through Foreign Currency Convertible Bonds for the restructuring of external debt which helps to lengthen maturity and soften terms, and for end-use of funds which conform to the norms prescribed by the Government for External Commercial Borrowings (ECBs) 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.

FCCB pricing :

14. 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 cost for FCCBs should be significantly better than the corresponding debt instruments (ECBs).

15. Companies will not be permitted to issue warrants along with their Euro-Issue.

Repatriation of proceeds :

16. Companies may retain the proceeds abroad or may remit funds into India in anticipation of the use of funds for approved end-uses.

Validity :

17. Both the in-principle and final approvals will be valid for three months from the date of their respective issue.

Review :

18. The policy and guidelines for Euro-Issues will be subject to review periodically.

Source : Press Note dated 20-6-1996 [Issued by the Department of Economic Affairs, Ministry of Finance, New Delhi, dated June 20, 1996.]

Clarification 6

The Government has made certain modifications in respect of Euro/ADR issues by the companies. This has been done on the basis of the periodic review of comprehensive guidelines for Euro issues which is done from time to time and assessment of the current situation.

1. Track record requirement : Considering the funding requirements of unlisted companies, it has been decided to permit all unlisted companies to float Euro/ADR issues provided they fulfil 3 years’ track record eligibility requirement. However, the current provisions for relaxing the 3 year track record requirement in the case of companies seeking GDR/ADR/FCCB issues to finance investments in infrastructure industries such as power generation, telecommunications, petroleum, petroleum exploration and refining, ports, airports and roads will continue.

These unlisted companies floating GDR/ADR/FCCB issues would, however, need to comply with the standard listing requirement of listing on the domestic stock exchanges within 3 years of having started making profit. At present, only listed companies are being permitted to issue GDRs/ADRs/FCCBs subject to the fulfilment of the track record requirement of good performance (financial or otherwise for a period of 3 years).

The following modifications are also made specifically for ADR/GDR issues :

2. Validity : The guidelines issued on 19th June, 1996 had provided that both the ‘in principle’ and final approval will be valid for 90 days from the date of their respective issue.

In partial modification, the 90 days validity period for final approval for GDRs and ADRs is being withdrawn.

End uses : GDRs/ADRs are equity instruments and there is no repayment liability on the issuing company. Unlike a commercial borrowing or a foreign currency convertible bond which carries a repayment liability on the company, GDRs/ADRs are full risk equity. It has, therefore, been decided that all end-use restrictions on GDR/ADR issue proceeds be removed.

The existing ban on investment of GDR/ADR issue proceeds in real estate and stock markets will, however, continue.

These modifications shall come into effect for approvals granted on or after the date of issue of these guidelines.

The Policy and Guidelines for Euro Issue will be subject to review periodically.

Source : Press Release, dated 22-5-1998, issued by the Press Information Bureau.

Clarification 7

In his Budget speech 1998-99, the Finance Minister, Shri Yashwant Sinha announced a special stock option scheme for Indian software companies linked with ADR/GDR offerings by these companies as an instrument to enable these companies to provide incentives to retain their highly skilled professionals. The scheme would enable Indian software companies to offer terms comparable to the packages offered by international companies in the field.

The scheme would be governed by the following guidelines :

(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 GDR/ADR linked stock option to its employees should clearly include such proposal as part of its application for GDR/ADRs, while DEA approval will be for total issue size inclusive of stock option, the GDRs/ADRs earmarked for the employees upto the specified limit will be issued by the company as and when an employee exercises his stock option. Accordingly, the company shall never exceed the approved level of GDRs/ADRs to be issued.

In the case of software companies which have already issued GDRs/ADRs, such companies may seek permission for issue of stock options related to the existing GDR/ADR 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.

(iii) A software company would be defined as 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.

The software company applying for issue of GDR/ADR linked stock options shall be required to submit relevant documents 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 RBI while applying for permission of foreign currency for acquisition of GDRs/ADRs in exercise of the stock option.

(iv) The stock options 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).

(v) The general FERA permission for resident employees of software companies under the ADR/GDR linked Stock Option Scheme shall be granted by RBI. Requisite notification for this purpose will be issued by RBI. This would entitle resident employees to acquire and/or hold ADR/GDR linked stock option, acquire ADR/GDR on exercise of the option, remit funds upto a limit of $ 50,000 in a block of five years for acquisition of ADRs/GDRs and to retain or continue holding ADRs/GDRs so acquired. The resident employee upon liquidation of ADR/GDR holding would need to repatriate the proceeds to India unless a general/specific permission from RBI is obtained for its retention or use abroad.

(vi) 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.

(vii) The issuing company would be entitled to issue options not exceeding 10 per cent of its issued and paid up equity capital.

(viii) The stock options may be issued at a discount of not more than 10 per cent to the market price at the time of the issue of the stock option.

(ix) While GDRs/ADRs acquired in exercise of the stock option shall be freely transferable, the stock options themselves shall be non-transferable.

(x) 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.

(xi) ADRs/GDRs acquired on exercise of stock option would be eligible for concessional tax treatment under section 115AC of the Income-tax Act, 1961. Necessary amendment under section 115AC of the Income-tax Act, 1961 shall be notified by the Department of Revenue separately.

Source : Press release, dated 23-6-1998, issued by the Press Information Bureau, Government of India.

Clarification 8

1. Indian companies are permitted to access the international capital markets through issue of GDRs/ADRs under the provisions of the “Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993” and subsequent guidelines on Euro Issues publicised through Press Notes by the Government of India, Ministry of Finance, Department of Economic Affairs. Under the Scheme, GDRs/ADRs are issued by overseas depositories against ordinary shares issued and placed with the domestic custodian by Indian companies.

2. Representations have been received from issuer companies seeking clarification on the eligibility/entitlements of GDR/ADR holders to the rights and bonus issues made by the company and on entitlements of GDR/ADR holders in cases of business reorganisation/mergers/demergers.

3. It is clarified that under the Scheme, a GDR/ADR holder is entitled to hold or transfer GDRs/ADRs, or redeem them into underlying ordinary shares with the option to continue holding underlying shares, and thus has a right to the ordinary shares underlying the GDRs/ADRs. Therefore, if an ordinary shareholder of the issuing company acquires a right or entitlement by virtue of ownership of ordinary shares, the GDR/ADR holder also matures the same rights or entitlements owing to his rights over underlying ordinary shares. GDR/ADR holders, therefore, are entitled to same bonus and rights issue of shares as any ordinary shareholders of company. Similarly, if ordinary shareholders of a company ‘A’ become entitled to shares of another company ‘B’ as a consequence of a genuine business reorganisation, and which is duly approved by the High Court under section 391/394 of the Indian Companies Act, then the GDR/ADR holders of company ‘A’ also mature the same entitlement to shares of company ‘B’.

4. Furthermore, when GDR/ADR holders mature an entitlement to shares in a company, the company would need to issue and place ordinary shares with the domestic custodian against which the overseas depository would issue corresponding GDRs/ADRs to the ADR/GDR holders.

5. It has, therefore, been decided to allow Indian companies to issue GDRs/ADRs in cases of bonus or right issue of shares or genuine business reorganisations duly approved by the High Court, in accordance with the provisions of the Scheme and the guidelines issued thereunder. Indian companies would be required to apply to the Department of Economic Affairs for obtaining approval for issue of GDRs/ADRs in all these cases. The Department of Economic Affairs would consider such requests on the basis of necessary supporting documents to assess that the proposed GDRs/ADRs issue is on account of the entitlements of GDR/ADR holders as stated above.

Source : Press Note [F. No. S-II(25)/CCI-II/89/NRI, dated 17-8-1998, issued by the Ministry of Finance, Department of Economic Affairs (Investment Division).

Clarification 9

1. It has now been decided to grant general permission for sale/transfer of underlying shares obtained after conversion of Global Depository Receipts (GDRs)/American Depository Receipts (ADRs) by persons not resident in India if the sale is proposed to be made through a stock exchange or when the underlying shares are being sold in terms of an offer made under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. All other cases of sale of shares underlying the GDRs/ADRs will have to be referred to the Reserve Bank of India for necessary permission.

2. The scheme for issue of ordinary shares through depository receipt mechanism provides that the holders of the GDRs/ADRs may ask the overseas depository to redeem the GDRs/ADRs. The overseas depository then requests the domestic custodian bank to get the corresponding underlying shares released in favour of the non-resident investor for being sold in India. The non-resident holder, so far, had to approach the Reserve Bank of India for necessary permission under Foreign Exchange Regulation Act, 1973, for sale of the shares. It was pointed out by several investors that there was a risk that markets may move against the sellers during the time needed for obtaining necessary RBI approval for sale.

Source : Press release : 1998-99/297, dated 9-9-1998, issued by the Press Relations Division, RBI.

Clarification 10

Guidelines were issued through a Press Note dated 23-6-1998 facilitating issue of GDR/ADR linked stock option to its employees by companies engaged in manufacture or production of software where not less than 80 per cent of the company’s turnover is from software activities.

2. A Notification was issued on 25-7-1998 by the Planning Commission announcing the recommendations made in the Information Technology Action Plan of the Prime Minister’s National Task Force on Information Technology and Software Development. Among others, the Task Force had recommended that the ADR/GDR linked stock option scheme for software companies be modified to include all companies engaged in Information Technology Software and Information Technology Services as defined in recommendation No. 19(a) and (b) of the Planning Commission Notification dated 25-7-1998.

3. Taking in view the recommendations, it has been decided by the Government to extend the facility for issue of ADR/GDR linked stock options to all companies engaged in the IT Software and IT Services as defined in the Notification referred to in para 2 above. All other parameters/requirements indicated in the Euro issue guidelines dated 23-6-1998 would continue to be applicable.

4. These guidelines come into force with immediate effect.

Group on Hi-Tech IT Habitats to be set up by the Task Force

(a) Definition : “IT Software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine falling under heading ‘IT Products’, but does not include ‘non-IT products’. ‘IT service’ is defined as any service which results from the use of any IT software over a system of IT products for realising value addition. The term ‘IT Industry’ shall cover development, production and services related to IT Products. The term ‘IT Software’ shall be substituted in place of ‘Computer Software’ in all notifications.

(b) Finance Ministry (CBEC) shall introduce a new classification called ‘Information Technology IT Products’ including Computer. Digital/Data communication and Digital/Data Broadcasting products, by recognising the progressive technological convergence of these three categories including all items in the classification list in Attachment A (Section I and Section II) of the WTO (ITA) Agreement and, additionally, Data Communication equipment.

(20) A revised Notification giving the following new schedule for the Government of India acceding to the WTO-ITA Ministerial Declaration of 13th December, 1996 at Singapore shall be issued by the Ministry of Finance :

In Attachment A. Sections I and II of WTO-ITA :

(a) Duty shall be brought down to zero by 1st January, 1999 on the following items : Parts and components excluding populated PCBs in HSN 8473.30, all storage devices in HSN 8471.70, ICs above Rs. 1,000 in HSN 8542, Stepper Motors in HSN 8501.10, Colour Graphic Display Tube in HSN 8540.40 and Deflective components for Colour monitor in HSN 8504.

(b) Out of the 217 items listed in ITA-I, 94 items which were proposed earlier for zero duty by 1st January, 2000 shall now be advanced to 1st January, 1999.

Source : Press Release [F.No. 17/2/97-NRI dated 16-9-1998], issued by the Ministry of Finance (Investment Division).

Clarification 11

Delivery of underlying shares of GDRs/ADRs in dematerialised form

At the meeting of the Working Group held on July 17, 1998, it was decided that delivery of undertaking shares of GDRs/ADRs shall compulsorily be in dematerialised form. The matter was referred to Reserve Bank of India (RBI). The RBI has issued two notifications on the subject permitting :

(a) a non-resident holder of ADRs/GDRs issued by a company registered in India, to acquire, upon surrendering ADRs/GDRs, the underlying shares when such shares are released by the Indian custodian of the ADR/GDR issue, and

(b) the company whose shares are so released, or a depository defined in clause (2) of sub-section (1) of section 2 of the Depositories Act, 1996 to enter in its register or books, in which securities are registered or inscribed, an address outside India of the non-resident holder of shares.

RBI has further clarified that there would not be any obstacle from FERA angle in the process of dematerialisation as the abovementioned notifications have issued to take care of the same. Copies of the notifications are enclosed herewith.

It has therefore been decided that henceforth delivery of underlying shares of ADRs/GDRs shall compulsorily be in dematerialised form. Stock Exchanges shall not accept delivery of underlying shares of ADRs/GDRs in physical form.

Source : SMDRP/Policy/Cir. 9/99, dated 29-4-1999, issued by the Secondary Market, SEBI.

Clarification 12

Permission for acquisition/purchase of shares acquired on surrender of ADRs/GDRs

In exercise of the powers conferred by clause (b) of sub-section (1) of section 29 and clause (b) of sub-section (4) of section 19 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), the Reserve Bank hereby permits :

Source : Notification No. FERA 193/99-RB, dated 16-3-1999, issued by the Exchange Control Department, RBI.

In exercise of the powers conferred by sub-section (6) of section 19 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), the Reserve Bank, being of the opinion that it is necessary and expedient in the public interest to do so, directs that its Notification No. FERA 185/98-RB, dated 19th August, 1998 shall be amended in the following manner, namely :

In the said Notification No. FERA 185 for the words “underlying ADR/GDR issue of a company registered in India” the words “acquired on surrendering GDRs/ADRs issued by a company registered in India” shall be substituted.

Source : Notification No. FERA 194/99-RB, dated 16-3-1999, issued by the Exchange Control Department, RBI.