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| Edited By: Nitin Shrivastava |Source: DNA |Updated: Mar 17, 2018, 03:58 AM IST
Standard Chartered Bank is set to become the first foreign company to list in India through an Indian depository receipts (IDR) issue.
The largest foreign bank in India, which reeled in a billion dollar of profit from domestic operations last year (India is its most profitable unit after Hong Kong), will sell 24 crore IDRs through a public issue opening on May 25.
Ten IDRs will equal a share of Standard Chartered Plc.
Like global depository receipts (GDRs) and American depositary shares (ADSs), IDRs are derivative instruments with shares as the underlying asset. They allow foreign companies to raise money in India.
StanChart expects to raise around $500-750 million (Rs 2,250-3375 crore) to grow its businesses globally.
Back-of-the-envelope calculation show an issue price of around Rs 105-115 per share.
This will be StanChart’s third listing — the bank’s already floated in London and Hong Kong; and it’s next stop is Shanghai.
Interestingly, the bank, which started operations in Kolkata in 1858, is not raising the money because it is desperate.
The IDR is to “a message of commitment to India”, which provides 12% of its global revenues.
“The issue will also increase our market visibility and brand profile, apart from giving Indian investors an opportunity to participate in our growth,” said Peter Sands, group chief executive.
StanChart’s net profit has grown at a compounded annual growth rate of 30% in the last three years, while profit before tax has trended at 38%.
Based on 2009 results, the StanChart share has a price to book value of 2, much better than the 2.5 for State Bank of India.
On the price to earnings metric, it trades at attractive 14.6 times compared with 15.7 for SBI and 29.4 for HDFC Bank.
The IDR is a play on fast-growing economies. 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. In India, it has 94 branches across 37 cities, with over 20 lakh customers.
Nimesh N Kampani, chairman and managing director of JM Financial, one of the book-running lead managers, said the price band would be announced by May 24 “depending on the closing price of the shares listed in the UK next weekend”. Bids from anchor investors would be taken on May 24.
