Sebi Gives Certain Relaxations To NRIs On Holding Depository Receipts

The capital market regulator Securities and Exchange Board of India (Sebi) on Friday gave certain relaxations to Non-Resident Indians (NRIs) in respect of holding of Depository Receipts (DRs) issued by India-listed companies.

NRIs can now hold DRs issued by the company under the employee stock option schemes, bonus issue, and rights issue, the regulator said.

In October 2019, Sebi barred NRIs from buying DRs issued by India-listed companies.

This restriction will not apply in the case of issue of DRs to NRIs, according to share-based employee benefit schemes that are implemented by a company in terms of Sebi (Share Based Employee Benefits) rules, the regulator said in a circular issued recently.

Also, the restriction would also not apply in the case of issue of DRs by the company to NRIs following a bonus issue or a rights issue, it added.

“Except as permitted under the provisos above, NRIs shall neither subscribe to any further issue of DRs nor make any further acquisition of DRs (including of DRs issued prior to October 10, 2019),” Sebi clarified.

It further said the onus of identification of NRI holders, who are issued DRs in terms of employee benefit scheme, would lie with the listed company.

The company would provide the information of such NRI DR holders to the designated depository for monitoring of limits, Sebi said.

Depository receipt is a foreign currency-denominated instrument, listed on an international exchange, issued by a foreign depository to a domestic custodian, and includes Global Depository Receipts (GDRs).

Advisors in the field of Portfolio Management Services (PMS) space opined that the Sebi circular clarifying framework for issuance of DRs provides a breather to companies planning to list abroad or whose DRs are already listed overseas. Now, these companies can compensate their employees or existing shareholders either with Employee Stock Options (ESOPs) or bonus and rights to respective beneficiaries.