UPDATE: Standard Chartered Makes Tepid Market Debut In India

11th Jun 2010 06:55

(Adds details, analyst comments, share price.) By John Satish Kumar Of DOW JONES NEWSWIRES MUMBAI (Dow Jones)--Standard Chartered PLC (580001.BY) made a tepid stock market debut in India Friday as tax rules and regulations on investing in depositary receipts led to a weak investor response to the first local listing of a foreign company. The Indian depositary receipts of the bank opened at INR105 on the Bombay Stock Exchange and traded between INR100.60 and INR108. They were at INR104.15 with volume of more than 9.70 million shares at 0540 GMT, when the benchmark Sensitive Index was up 1.1%. The London-based, but Asia-focused bank last month raised INR24.96 billion ($531 million) by selling 240 million Indian depositary receipts at INR104 each as part of its efforts to increase its visibility in India. Analysts and other market watchers viewed it as a test case for global companies seeking to tap the capital market in the second-fastest-growing economy after China. But, local insurance firms couldn't participate in the issue as they aren't allowed to invest in overseas companies. Also, retail investors were discouraged by India's rules on long-term capital gains tax. Investors are exempt from paying tax on gains from holding local shares for more than a year. But, holders of depositary receipts won't get that exemption. "We feel that the probability of sizeable gains on listing seems to be limited... one needs to bear in mind the higher capital gains and dividend tax incidence on returns from IDRs compared with domestic shares," Tiju Samuel of HDFC Securities wrote in a note. Investors in the IDR would also lose out if the Indian rupee appreciates against the British pound, Samuel said. "The IDR product hasn't been understood by large sections of the investor community, so it will continue to trade at a discount of 5%-10% to its overseas prices," said investment adviser S.P. Tulsian. "Besides, retail investors have a view that taxation on this product is higher. So it deters appetite." On Thursday, Standard Chartered's shares closed 1.7% up at GBP16.32 on the London Stock Exchange. Ten IDRs represent one Standard Chartered share. Tulsian expects the IDR to trade in a band of INR100-INR105 in the short term. During the subscription period, the issue had to endure tepid early response due to a regulation from May 1 that made it compulsory for institutional investors to pay upfront for the entire stake for which they have bid, instead of paying 10% previously. The offer received bids for only 11% of the issue size until the end of the third day. Though, the issue was finally subscribed about 2.2 times, most of the bids had come in the last few hours of the subscription period. UBS Securities India Pvt. Ltd, Goldman Sachs (India) Securities Pvt. Ltd., JM Financial Consultants Pvt. Ltd., Bank of America-Merrill Lynch Ltd., Kotak Mahindra Capital Co., SBI Capital Markets Ltd. and Standard Chartered-STCI Capital Markets Ltd. were the managers of the issue. -By John Satish Kumar; Dow Jones Newswires; +91-22-61456118; [email protected] (END) Dow Jones Newswires June 11, 2010 01:55 ET (05:55 GMT)