Standard Chartered to go ahead with Indian listing

The UK-based bank will be the first foreign company to sell Indian depositary receipts and the first to be publicly traded on India's two major exchanges.

Standard Chartered yesterday confirmed that it will go ahead with its earlier announced sale of Indian depositary receipts (IDRs) and listing in India, making it the first foreign firm to be publicly traded on India's two major exchanges.

The UK-based bank, which derives more than 90% of its revenues from Asia, the Middle-East and Africa, said it will sell 240 million IDRs in an offering that will run from May 25 to 28. Each 10 IDRs will represent 1 common share, meaning the Indian offering will account for about 1.2% of its overall share capital.

Standard Chartered didn't comment on the size of the offering yesterday, but has earlier said that it wants to sell enough IDRs to ensure the instrument will be liquid -- the bank's own assumption is that this will require an issue of at least $500 million. Based on the current share price for Standard Chartered's London-listed stock, a sale of the equivalent of 24 million new shares would be worth about £406 million, or $605 million. The IDRs are expected to be offered at a discount to the UK-listed shares, however, and the final price range won't be announced until the day before the offering opens. Consequently, the final deal size will depend on how the UK-listed shares trade between now and then.

While this is technically a follow-on, the IDRs will be sold much like an initial public offering -- hence the price range -- with 50% of the deal targeted at qualified institutional investors and at least 30% offered to retail investors. The remainder will be sold to corporate and high-net-worth individuals.

The company also plans to offer up to 30% of the QIB tranche to anchor investors the day before the actual bookbuilding opens, a practice introduced for Indian IPOs last summer.

The IDR platform, which was first proposed almost a decade ago and eventually put in place in June last year, is intended to allow Indian investors to buy and hold foreign shares through an Indian broker and denominated in rupees -- thus avoiding many of the hassles and restrictions otherwise associated with overseas investments.

Under current regulations, Indian investors can only invest up to $200,000 in shares of foreign companies and the entire process is often both costly and cumbersome. Because IDRs are denominated in rupees, that limit doesn't apply.

For the issuers, IDRs are expected to be more about increasing their visibility in India than raising new capital. Indeed, if money was the issue, Standard Chartered could have raised this amount and more in a simple overnight placement in London and spared itself a lot of both work and costs. Another key reason for selling IDRs, bankers say, is the possibility of using them as a base for stock options to employees in India, thus giving the company another tool for retaining key staff.

"This is a unique opportunity to raise our profile and allow investors in India to participate in our future," Standard Chartered's group chief executive Peter Sands said when the bank announced its listing plans in March. "The bank's intention to be the first company to list IDRs "demonstrates how important India is to Standard Chartered," he added.

Standard Chartered is the largest foreign bank in India with a widespread branch network that makes it a household name with both institutions and retail investors. India is also its second most profitable market after Hong Kong, with more than $1 billion of profits earned across its various Indian business lines last year. It opened its first branch in the county in 1858.

The offering will be arranged by DSP Merrill Lynch, Goldman Sachs, JM Financial, Kotak Mahindra, SBI Capital Markets and UBS. Bank of New York Mellon has been appointed as the DR bank.

¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media