Finance Friday: India’s first ever IDR from Standard Chartered gets lukewarm response – subscribed 1.38 times !


On April 2, we had posted under this very section of Friday Finance, regarding India’s first ever IDR issue by Standard Chartered Bank aiming to raise anywhere between $500-750 million through issue of 24 crore IDRs.

Every 10 IDR will be representing 1 share of Standard Chartered under which investors will have the option to convert them into shares after one year.

The subscription for the Indian Depository Receipts (IDR) of UK-based banking major Standard Chartered, which is priced in the range of Rs.100 to Rs.115, is slated to close today. The foreign bank has launched its first ever IDR to enhance its market visibility and brand profile in India.

Standard Chartered IDR Issue

Until now, the issue has received a tepid response as per the latest updates available on the NSE site. The IDR has just managed to garner the targeted response with subscription figures of 1.38 times as on 03.00 pm. In fact, the issue had got very nominal subscription figures of 11% during the first three days.

However, this sort of lukewarm response for the StanChart IDR has come contrary to the positive recommendations tipped by most of the brokerage reports.

IIFL had recommended in its research report as:

“SCB’s Indian Depositary Receipt (IDR) provides an opportunity for Indian investors to buy into a truly pan-Asian bank with strong presence in India, Hong Kong, South Korea and Singapore. The bank emerged unscathed from the recent financial crisis and has delivered a remarkable 16.5% net profit CAGR during 2004-09. It is a well-known brand in Asia, offering a full product suite, strong ability to offer cross-border financing and deal structuring, stable funding base, and a well-capitalized balance sheet.”

According to one another report by SMC Capital:

The bad market conditions are putting pressure on the ongoing IPO of Standard Chartered IDR. However, if one closely observes, there is some opportunity emerging in the Standard Chartered IDR.”

Nirmal Bang had advised investors to subscribe the IDR:

“At current market price of 16.11 pounds Standard Chartered is trading at 14x on P/E basis and 1.8x on P/BV basis. ROE of the bank stands at 13.3%. We believe that IDR price will reflect the corresponding equity price in London of Standard Chartered Bank. At CMP of 16.11 pound the corresponding price of IDR in Rupee comes around Rs.109 which is lower than the upper band price of Rs.115.”

Broking firm Angel Securities had recommended:

“Standard Chartered Bank’s (SCB) IDR provides Indian investors a vehicle to invest in a global entity that has a global presence. As a result of its diversified presence and emerging market focus, SCB came out relatively unscathed from the sub-prime crisis and is now well poised to benefit from the ongoing recovery in emerging economies. Hence, the bank is an excellent diversified multinational banking play, with strategic positioning in high-growth emerging markets. The stock is currently trading at 1.7x CY2010 P/B vis-à-vis 2.9x and 3.8x FY2010 P/B for Axis Bank and HDFC Bank, respectively. We recommend subscribe to the issue."

Since foreign companies cannot list in India, IDR could be a good medium for the Indian investors to take part in the growth of the foreign company. But, going by the response to the StanChart IDR, it seems Indian investors are not content with either the valuations of the issue or still risk-averse to invest in shares of foreign banks.

Well, if I am missing some point, it could as well be that Indian investors are more content to invest in state-owned SBI and Bank of Baroda’s of the world? ;)

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