The Securities and Exchange Board of India (SEBI) has said that Indian depository receipts (IDRs) cannot be converted into London-listed shares. The news has shocked foreign investors, who previously believed that such conversions would be possible.
In a circular released on 3 June, SEBI noted that IDRs would not be redeemable into underlying equity shares until a year after the IDRs had been issued. In addition, the regulator stated that “two-way fungibility (the ability to purchase existing shares on the London Stock Exchange and/or the Hong Kong Stock Exchange and deposit them into the IDR programme) is not currently permitted.”
The circular also states that IDR redemption will only be allowed a year after the IDRs have been issued on the condition that the IDRs are “infrequently traded” on stock exchanges in India. IDRs will be considered “infrequently traded” if the annual trading turnover in IDRs six months before the month of redemption is less than 5% of the listed IDRs.
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