What is an IDR?
IDR is Indian Depository Receipts issued by a domestic depository in India and denominated in Rupees. It represents an ownership interest in a fixed number of underlying equity shares of the Issuing company. These shares are called Deposited Shares.
Why should a company issue an IDR?
A foreign company which cannot go through the listing process in India but wanting to share the risk and rewards of the issue with Indian shareholders issues an IDR. Standard Chartered Bank is the first company to issue IDR in India.
Is it just like buying shares of Standard Chartered Bank in the UK?
More of less yes. However you will also run the currency risk because the price of the IDR price will move in tandem with the underlying shares of Standard Chartered Bank.
What is the logic of buying IDR of Standard Chartered Bank?
The very high price earning ratios of Indian banks (if you still call Hdfc and Icici banks Indian!!) must have prompted Stan C to think of an IDR. Most of the revenues for Stan C come from Asia, it employs many Indians even internationally, and they have a fantastic client base in Asia. So they will lap it up in India hence they must be issuing shares. Also for the company the currency risk is reduced with the Euro not in great shape. In all, a win –win deal for all.
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