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BUY Target 120
What is IDR? (Indian Depository Receipt)
IDR is an instrument in the form of a Depository Receipt
created by the Indian depository in India against the underlying
equity shares of the issuing company. In an IDR, foreign
companies would issue shares, to an Indian Depository (say
National Security Depository Limited – NSDL), which would in
turn issue depository receipts to investors in India. The actual
shares underlying the IDRs would be held by an Overseas
Custodian, which shall authorise the Indian Depository to issue
the IDRs. The IDRs would have following features:
~ IDRs would not be redeemable into underlying equity shares
before one year from date of issue.
~ Such company should also have earned profits in the last 5
years and should have declared dividend of at least 10% each
year during this period.
~ The pre-issue debt equity ratio of such company should not
be more than 2:1.
~ In addition to other avenues, IDR is an additional investment
opportunity for Indian investors for overseas investment.
Standard Chartered PLC IDR
Standard Chartered plc is an international banking group
operating principally in Asia, Africa and Middle East. The
company offers its products and services in the personal,
consumer, corporate, institutional and treasury areas.
The bank came up through IDR route to raise money in India.
This is the only IDR listed in India. The parent company
Standard Chartered Bank after the 2008 fall is the only
company that has survived well and crossed its earlier high. It
has been able to maintain its asset quality and sustain in this
volatile environment after that also. Consumer banking has
shown some good growth and cost control where as wholesale
banking has shown some soft performance. The key drivers
have been improvement in the segments of wealth
management, SME, credit card dept and personal loans.
Though in short term the bank is facing hurdles in revenue
growth but over all, the outlook for the company is good.
And this positive outlook in performance going forward also
should be reflected in the share price or IDR in our markets as
well.
Valuations
After the SEBI announcement – the stock saw selling pressure
and sharp correction was seen. Now currently at this level the
stock looks attractive with good fundamentals and
performance background and global peer group comparison
we have a positive outlook for the stock for a price target of
Rs. 120.
Concerns
Regulatory hurdle - SEBI announcing that IDR holders cannot
convert the instrument into primary equity shares of the foreign
company after a year, unless the IDR is illiquid. Clarification on
the same is required.
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