ebruary 13, 2002

'15'

ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS AND ORDINARY SHARES (THROUGH DEPOSITARY RECEIPT MECHANISM) SCHEME, 1993 AMENDED - PRESS NOTE

    A Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) was notified by the Government of India on 12th November, 1993. Revisions/modifications in the operative guidelines of the Scheme have been made from time to time.

2. Pursuant to Finance Minister's Budget Speech of 2001-2002 providing ADRs/GDRs with limited two way fungibility in terms of which converted domestic shares of Indian companies may be re-converted in to ADRs/GDRs while being subject to sectoral caps wherever applicable, the "Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993" dated the 12th November, 1993, notified by the Ministry of Finance, Department of Economic Affairs, as amended from time to time is further amended as under:-

(i) ADRs/GDRs redeemed and underlying shares sold in the domestic market shall be eligible for being reconverted as ADRs/GDRs to such extent.

(ii) Such re-conversion shall be governed by paragraph "4A" in schedule 1 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India)(Amendment) Regulations, 2001 notified by Reserve Bank of India vide FEMA.41/2001-RB dated 02-03-2001

(iii) The domestic custodian will maintain details of ADRs/GDRs issued, cancelled, sold, re-converted and co-ordinate with the company/NSDL to ensure that total cap is not breached if there is a percentage cap on foreign investment or where there is a possibility of equity limits for automatic approval/FIPB approval being breached.

(iv) The Scheme would be governed by the operative guidelines being issued by the Reserve Bank of India.

(v) The tax provision under Section 115 AC of the Income Tax Act 1961, which is applicable to non-resident investors investing in ADRs/GDRs offered against issue of fresh underlying shares would extend to non-resident investors investing in foreign exchange in ADRs/GDRs issued against existing shares under these guidelines, in terms of the amendment to the Income Tax Act, 1961 which would come into force with effect from 01.04.2002.