On November 4, 2015, SEBI issued a circular to prescribe a format for reporting holding patterns for Indian Depository Receipts (“IDRs”) on a quarterly basis, disclosure norms for corporate governance and guidelines for compliance for two – way fungibility of IDRs, (“SEBI Circular”). The SEBI Circular will come into effect with the coming into effect of the Listing Regulations, since the SEBI Circular has been issued pursuant to provisions contained in the Listing Regulations. Some of the conditions set forth by the SEBI Circular are summarised below:

  1. Listed entities that have issued IDRs should file the holding pattern of the same on a quarterly basis within 15 (fifteen) days of the end of a quarter, in the prescribed format;
  2. Listed entities should submit to the relevant stock exchange, a comparative analysis of corporate governance provisions that are applicable  in  such  a  listed  entity’s  home country and in other jurisdictions in which its equity shares are listed along with the compliance of the same and in relation to corporate governance requirements applicable to other listed entities;
  3. As per the Listing Regulations, IDRs will have two-way fungibility, guidelines and procedure for which are prescribed. Further, an issuer may provide the said fungibility to IDR holders by permitting the IDRs to be converted into underlying shares and/or by selling them in the foreign market upon conversion;
  4. Guidelines for fungibility of future IDR issuance, stipulate that IDRs will not be redeemable into underlying equity shares before the expiry of 1 (one) year period from the date of listing of IDRs.

Permitting two-way fungibility of IDRs will attempt enhance investors’ interests in investing in IDRs, which should enable the IDR market to improve from its existing condition.