British bank Standard Chartered’s Indian depositary receipts (IDRs) traded close to their offer price in debut trading on the Mumbai stock exchange yesterday, in the first issue of its kind.
The bank, which makes most of its profits in Asia, last month raised US$530 million through the pioneering sale of IDRs.
IDRs are rupee-denominated certificates similar to US Depository Receipts that show ownership of shares in an overseas firm, with every 10 IDRs representing one Standard Chartered share.
Foreign firms are not allowed to list shares directly in India.
The Standard Chartered IDR rose to a day’s high of 108 rupees, before retracing to Rs104 at noon, as the benchmark 30-share SENSEX rose 1.2 percent.
India is Standard Chartered’s second-largest and fastest-growing market after Hong Kong, with profit in excess of US$1 billion last year.
“This is a historic development, as we got a strong response despite global volatility,” Standard Chartered chairman John Peace told reporters in Mumbai.
“India is in our DNA. We hope to go from strength to strength with a focus on emerging markets,” he said.
Analysts say Standard Chartered is better positioned than other global banks in a tough economic climate, as the majority of its business comes from high-growth emerging markets.
“The bank is a good long-term buy. We expect the local IDR to track the London price and global clues,” said Gaurav Dua, head of research at Sharekhan brokerage.
The IDR price was below the bank’s London stock exchange closing price of £16.49 on Thursday, which works out at Rs113 per IDR, with 10 IDRs equivalent to one Standard Chartered PLC share.
“We will see a trend where the IDRs will initially trade in the range of a 6 to 8 percent discount to the underlying London stock’s price,” Kejriwal Research director Arun Kejriwal said.
Local trading interest could be limited, as IDRs attract higher capital gains and dividend tax than local shares.
Buyers of the certificates can earn bonuses or dividends.
The funds raised through the IDR will be repatriated to the bank’s London headquarters as capital reserve to be used for growth and expansion plans.
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