Dec 13, 1999|
Govt. to liberalise policy for issuing ADRs, GDRs
The finance ministry is likely to substantially liberalise its policy on corporates issuing global depository receipts (GDRs) and American depository receipts (ADRs) by creating an automatic route for such equity issues. The ministry is also considering extending similar benefits to companies accessing external commercial borrowings (ECBs). The concessions will be extended with a special focus on the infotech sector.
The government's decision to forward these concessions will help in raising foreign exchange resources for companies looking at either international acquisitions or purchases. The move will also enable companies to get better valuations for their offerings. In view of the large investment requirements in the country and the depressed primary markets (except for offerings by infotech companies), the decision is a step in the right direction.
With the government's forex assets already at over US$ 30 bn, the fear that the foreign debt servicing may put pressure on the value of the rupee is greatly reduced. Thus, extending similar concessions to companies opting for foreign debt also needs to be supported.
Liberalising the guidelines pertaining to the issue of ADRs and GDRs needs to be supported at all levels. Larger inflow of foreign resources will support investment activity in the country at levels that would have otherwise led to higher cost of funds.
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