Standard Chartered Bank PLC had come out with a IDR issue in May 2010. The issues was listed on the 11th of June 2010 and as per the terms and conditions, holders of the IDR after one year of the listing were in a position to convert the IDR into the underlying shares provided they sold such shares within 30 days of conversion. What this meant was that conversion was allowed with the specific purpose of selling the shares and did not allow Indian Investors to hold shares of a foreign company.
SEBI has one week before the IDR could be technically offered for conversion into the underlying shares changed the rules completely. It has effectively barred the conversion into underlying except in a case where the trading quantum of the IDR becomes infrequent.
The SEBI definition is reproduced below: –
After the completion of one year from the date of issuance of IDRs, redemption of the IDRs shall be permitted only if the IDRs are infrequently traded on the stock exchange(s) in India.
Explanation- For this purpose, IDRs shall be deemed to be “infrequently traded” if the annualized trading turnover in IDRs during the six calendar months immediately preceding the month of redemption is less than five percent of the listed IDRs.
b. The issuer company shall test the frequency of trading of IDRs on a half yearly basis ending on June and December of every year.
Standard Chartered IDR trading price chart
From the above price chart it appears that the share/idr has done nothing much in the past 51 weeks. With this new announcement by SEBI, investors who were hoping that they would be able to convert and make some profit would be in for a major disappointment.
