"Not only Indian companies are going abroad to raise funds, foreign companies are also coming to India to raise funds." Name the instrument(s) through which a foreign company can raise funds in India by issuing its own e

A foreign company can raise funds in India by issuing its own equity shares through Indian Depository Receipts (IDRs). According to Section 2(48) of the Companies Act, 2013 "Indian Depository Receipt" means any instrument in the form of a depository receipt created by a domestic depository in India and authorised by a company incorporated outside India making an issue of such depository receipts. Alternate Answer I Section 390 of the Companies Act, 2013 and rule 13 of Companies (Registration of Foreign Companies) Rules, 2014 lays down the eligibility criteria and conditions for issue of Indian Depository Receipts. Eligibility for Issue of IDRs Sub-rule 2 of Rule 13 of the Companies (Registration of Foreign Companies) Rules, 2014 stipulates that the issuing company shall not issue IDRs unless – its pre-issue paid-up capital and free reserves are at least US$ 50 million and it has a minimum average market capitalization (during the last three years) in its parent country of at least US$ 100 million; it has been continuously trading on a stock exchange in its parent or home country (the country of incorporation of such company) for at least three immediately preceding years; it has a track record of distributable profits in terms of Section 123 of the Act, for at least three out of immediately preceding five years; it fulfills such other eligibility criteria as may be laid down by the SEBI from time to time in this behalf. Conditions Sub-rule 5 deals with conditions required to be fulfilled for issue of prospectus which is as under: No application form for the securities of the issuing company shall be issued unless the form is accompanied by a memorandum containing the salient features of prospectus in the specified form. An application form can be issued without the memorandum as specified in clause (a), if it is issued in connection with an invitation to enter into an underwriting agreement with respect to the IDRs. The prospectus for subscription of IDRs of the Issuing company which includes a statement purporting to be made by an expert shall not be circulated, issued or distributed in India or abroad unless a statement that the expert has given his written consent to the issue thereof and has not withdrawn such consent before the delivery of a copy of the prospectus to SEBI and the Registrar of Companies, New Delhi, appears on the prospectus. The provisions of the Act shall apply for all liabilities for mis-statements in prospectus or punishment for fraudulently inducing persons to invest money in IDRs. The person(s) responsible for issue of the prospectus shall not incur any liability by reason of any non-compliance with or contravention of any provision of this rule, if - as regards any matter not disclosed, he proves that he had no knowledge thereof; or the contravention arose in respect of such matters which in the opinion of the Central Government or SEBI were not material. Alternate Answer II A company has to comply with Chapter X and XA of SEBI (ICDR) Regulations, 2009 to issue IDRs or a rights issue of IDRs. Eligibility An issuing company making an issue of IDR shall satisfy the following: the issuing company is listed in its home country; the issuing company is not prohibited to issue securities by any regulatory body; the issuing company has track record of compliance with securities market regulations in its home country. Conditions for Issue of IDR An issue of IDR shall be subject to the following conditions: issue size shall not be less than fifty crore rupees; procedure to be followed by each class of applicant for applying shall be mentioned in the prospectus; minimum application amount shall be twenty thousand rupees; at least fifty per cent of the IDR issued shall be allotted to qualified institutional buyers on proportionate basis; the balance fifty per cent may be allocated among the categories of non-institutional investors and retail individual investors including employees at the discretion of the issuer and the manner of allocation shall be disclosed in the prospectus. Allotment to investors within a category shall be on proportionate basis; However, at least thirty percent of IDRs being offered in the public issue shall be available for allocation to retail individual investors and in case of under subscription in retail individual investor category. Spill over to the other categories to the extent of under subscription may be permitted. at any given time, there shall be only one denomination of IDR of the issuing company; the underlying equity shares against which IDR, are issued have been or will be listed in its home country before listing of IDRs in stock exchange(s); the underlying shares of IDRs shall rank pari-passu with the existing shares of the same class.