Procedure of issuing instruments

Agencies Involved in the GDR Issue• Lead Manager -The firm should be registered with the

appropriate regulatory authority in Europe/ Singapore or Japan.

• Depository – Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs.

• Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges. Generally the Depository also acts as the Listing Agent.

Agencies Involved in the GDR Issue contd…

• Custodian - It is the domestic Bank who holds the underlying shares/ Bonds Issued against the GDRs.

• Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager. It also assists the Company in preparation of the Information Memorandum/ offer document for submitting it with the Overseas Stock Exchange.

Agencies Involved in the GDR Issue contd…

• UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange. They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement, Subscription Agreement and vet the Information Memorandum (IM).

• Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange

Procedure for Issue of GDRs• Convene a Board Meeting to approve the proposed GDR

Issue for not exceeding certain value in foreign currency.• Convene the EGM for the approval of the shareholders for

the proposed GDR Issue under Sec 81(1A) of the Companies Act, 1956.

• Identify the Agencies• Convene a Board Meeting to approve the Agencies.• Appoint the Agencies and sign the Engagement Letters.• The Indian Legal Counsel to undertake the Due Diligence.

Procedure for Issue of GDRs contd…

• Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon.

• Prepare the 2nd/3rd draft of IM incorporating the comments.• The Listing Agent to submit the IM with the overseas Stock

Exchange for their comments and In principle Listing Approval.

• Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Company’s shares are listed for In principle approval for listing of the underlying shares.

Procedure for Issue of GDRs contd…

• Hold Board Meeting to approve the Deposit Agreement, Subscription Agreement and the Escrow Agreement.

• On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing.

• The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges.

Procedure for Issue of GDRs contd…

• Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement.

• In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private

placement,- the number of GDRs to be issued.- the issue price. (the Issue price is normally 5-10 % discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue.- number of underlying shares to be issued against each GDR.

Procedure for Issue of GDRs contd…

• On the day of the opening of the Issue execute the Deposit and Subscription Agreements.

• The Issue should be kept open for a minimum period of 3 working days.

• Immediately on closing of the Issue convene a Board/ Committee Meeting for allotment of the underlying shares against the Issue of the GDRs.

• Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank.

Procedure for Issue of GDRs contd…

• On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange.

• After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Company’s Account.

• The Company can either remit the entire funds or in part as per its discretion.

Procedure for Issue of GDRs contd…

• On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository i.e., NSDL and CDSL.

• Obtain Trading approval.

• Intimate the Custodian for converting the physical shares into Demat.

Bond

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Figure 24.2 A Bearer Bond and Its Unclipped Coupons Issued by the Elmira and Williamsport Railroad Company for $500

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BondsThe Issuing Process

• The mandate• Appointing the lead manager (see the parties involved) and, advised by them, choosing the size, structure and timing

of the bond issue.• • Due diligence • Providing and verifying all the information required for the issuer's listing document and the supporting

documentation. Legal advisers lead this work. • • Preparation • Preparing the documents including the information memorandum and listing particulars and presenting them to the

UKLA and the Exchange. • • Launch • With the due diligence and marketing completed, this is the official announcement of the bond issue when the lead

manager invites the syndicate (see the parties involved) to participate in placing the bonds with investors.• • Signing and closing • The signing is when an issuer and their advisers sign and execute all the documents. Shortly after this and the closing,

the issuer receive the proceeds of their bond issue. • • Secondary market trading• With the bonds now listed on the London Stock Exchange they are eligible to be traded by investors, either on the

open market or, in the case of Eurobonds, by private deals between institutional investors. Ref; the London stock Exchange

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• Parties involved • There are a number of parties to every bond issue, each with their own role to play in assisting the

issuer and ensuring the issue's success. Here we summarise the roles of the main players.

• Lead manager and syndicate• The lead manager, normally a financial institution such as an investment bank, is responsible for managing

the entire issue process. As well as advising the issuer on the structure and timing of the issue, the lead manager appoints the syndicate, a group of investment banks that will market and sell (and, usually, underwrite) the issue.

• • Legal advisers• Responsible for the due diligence process – verifying statements of fact - and for the drafting of the listing

particulars and the supporting documentation.• • Paying agents• The paying agent is responsible for receiving a bond's interest payments from the issuer and distributing

them to the bondholders.• • Clearing systems and depositary• Euroclear and Clearstream are the two main systems for monitoring and validating the transfer of bonds

('clearing') listed in London – in both the primary and secondary markets. Most bonds are issued in bearer form and held by a depositary (usually a bank) for safe keeping.

• • Trustee• Appointed by the investors in the notes, the trustee is the representative of the bondholders, charged with

protecting their rights and ensuring the terms of the bond are adhered to. • • Fiscal agent• Acts on the behalf of the issuer to ensure the payment of interest and principal.•

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BondsThe Issuing Process

Typical Time LinesMandate Launch Signing Closing

3 to 8 weeks up to 2 weeks up to 1 week

London Listing

UKLA

LSE

Listing application

Listing particularsapproved

Listing granted Listing effective

Application for admission to trading

Admission granted Trading may begin

*10 clear business days 2 days

1 day

** 2 days