The IDR is priced between Rs.100-Rs.115 which will help SCB raise between Rs.2400 crores to Rs.2760 crores. There will be a 5% discount to retail individual investors.

IDRs are derivative instruments that derive their value from the shares deposited with custodians. The foreign company will deposit shares with a custodian, who will issue depository receipts based on these shares. This is the first IDR issue ever and history is being made.

IDRs are just the American Depository Receipts (ADR) and Global Depository Receipts (GDR) issued by Indian companies to raise money overseas. Likewise, Stanchart is issuing IDRs to raise money from Indian investors.

This will be StanChart’s third listing — the bank’s already floated in London and Hong Kong.

Standard Chartered Bank has been operating in India since 1858 has presence in 37 cities through its 94 branches. StanChart focuses on Asia, Africa and the Middle East with 90% of its profit before tax coming from these markets. The bank has a presence across geographies with mix of wholesale and retail banking products. It has no exposure to Greek sovereign bonds.

Mr Peter Sands, Group CEO, Standard Chartered PLC said "the issue is not so much for raising capital as for enhancing the bank's brand image in India, its second largest market in terms of profit, after Hong Kong".

TAXATION ISSUE :

The SCB IDR issue has a significant drawback and that is the IDR will be taxed even for Long Term Capital Gains@10.3(without indexation) and 20.6(with indexation).

The Short Term Capital Gains will be taxed @ 30.9%

Even Dividends will face the music of Dividend Distribution Tax.

The good news is that this IDRs will not attract Securities Transaction Tax.  

The other significant risk associated with this IDR issue is the Currency risk. However, it must be said in SCB's favour that the risk is mitigated as SCB earns most of its revenue outside UK.

With the shares of Standard Chartered Plc closed at 1,613 pence on the LSE on Friday,  the IDR works to about Rs.109.25 as 10 IDRs represent one share of the parent company.

WHAT OTHERS RECOMMEND :

BusinessLine : Invest. SCBs large size, well-diversified presence across emerging markets, along with a clean balance sheet and strong risk management systems, make the stock a good investment.

RECOMMENDATION :

The 5% discount adds to the attraction of owning a Foreign Bank at a decent price.

At around Rs.105 (after factoring the 5% retail discount), the IDR is priced at a discount to Indian peers like HDFC Bank and ICICI Bank. Do not expect 'listing gains' but invest for long term, you will not regret.