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The Tax Publishers CLARIFICATION 3 Modification of Euro Issue GuidelinesSource : Press Note [F.No. S. 11(25)/CCI-II/89/NRI], dt. 25-11-1995, issued by the Department of Economic Affairs, Foreign Trade and Investment Division, Ministry of Finance. Government of India had notified a Scheme in November 1993, for issue of Foreign Currency Convertible Bonds and Ordinary Shares through Depository Receipt Mechanism. Revision/modifications in the operative guidelines are being announced from time to time. On the basis of the periodic review and assessment of current situation, the following modifications are announced to the existing Euro issue guidelines : (i) The guidelines of 28-10-1994 provided that the Euro Issue proceeds to be mandatorily retained abroad by the issuer companies to be repatriated as and when expenditure on approved project/end uses were incurred. This requirement was partially modified through a Press Release, dt. 24-5-1995 providing option to the issuing companies to also keep funds in form currency deposits with Banks and Public Financial Institutions in India to be converted into Indian rupees as and when expenditure on approved end uses were incurred. In relaxation of the above requirement, companies will now be permitted to remit funds into India in anticipation of the use of funds for approved end uses. (ii) The existing ceiling for use of issue proceeds for general corporate restructuring including working capital requirement is revised from 15 per cent to 25 per cent of the GDR issue. (iii) At present only companies having a consistent track record of good performance (financial or otherwise) for a minimum period of three years are allowed to issue GDRs/FCCBs. In view of the importance of the infrastructure projects, and the need to encourage equity financing of such projects, the three-year track record will be relaxed in case of companies seeking GDR/FCCB issues to finance investment in infrastructure industries such as power generation, telecommunication, petroleum exploration and refining, ports, airports, roads. (iv) Currently corporates are permitted to access foreign capital market for External Commercial Borrowing through instruments like FRN and fixed rate bonds. In order to enable corporates to tap a wider spectrum of the market, they would also be permitted to structure their borrowings as a FCCB. The end-use of funds through a FCCB should conform to the norms prescribed by government for ECB from time to time. While the time frame for conversion of FCCB is flexible, the non-converted portion should have a minimum average tenor of five years. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers
CLARIFICATION 3
Modification of Euro Issue GuidelinesSource : Press Note [F.No. S. 11(25)/CCI-II/89/NRI], dt. 25-11-1995, issued by the Department of Economic Affairs, Foreign Trade and Investment Division, Ministry of Finance.

Government of India had notified a Scheme in November 1993, for issue of Foreign Currency Convertible Bonds and Ordinary Shares through Depository Receipt Mechanism. Revision/modifications in the operative guidelines are being announced from time to time. On the basis of the periodic review and assessment of current situation, the following modifications are announced to the existing Euro issue guidelines :

(i) The guidelines of 28-10-1994 provided that the Euro Issue proceeds to be mandatorily retained abroad by the issuer companies to be repatriated as and when expenditure on approved project/end uses were incurred. This requirement was partially modified through a Press Release, dt. 24-5-1995 providing option to the issuing companies to also keep funds in form currency deposits with Banks and Public Financial Institutions in India to be converted into Indian rupees as and when expenditure on approved end uses were incurred. In relaxation of the above requirement, companies will now be permitted to remit funds into India in anticipation of the use of funds for approved end uses.

(ii) The existing ceiling for use of issue proceeds for general corporate restructuring including working capital requirement is revised from 15 per cent to 25 per cent of the GDR issue.

(iii) At present only companies having a consistent track record of good performance (financial or otherwise) for a minimum period of three years are allowed to issue GDRs/FCCBs. In view of the importance of the infrastructure projects, and the need to encourage equity financing of such projects, the three-year track record will be relaxed in case of companies seeking GDR/FCCB issues to finance investment in infrastructure industries such as power generation, telecommunication, petroleum exploration and refining, ports, airports, roads.

(iv) Currently corporates are permitted to access foreign capital market for External Commercial Borrowing through instruments like FRN and fixed rate bonds. In order to enable corporates to tap a wider spectrum of the market, they would also be permitted to structure their borrowings as a FCCB. The end-use of funds through a FCCB should conform to the norms prescribed by government for ECB from time to time. While the time frame for conversion of FCCB is flexible, the non-converted portion should have a minimum average tenor of five years.