Jaspal Bindra, group CEO, Standard Chartered Bank, on Wednesday said there were impurities in the bank’s Indian depository receipts (IDRs) and that he was not surprised by the performance of the IDRs.
“When we launched the product, we already knew that the instrument had impurities,” he said, adding, that the fact that insurance companies were not allowed to invest and there was a tax inequality on retail investors, added to the problem."So we were not surprised by the development," Bindra told reporters on the sidelines of the India-Japan summit in Tokyo.
The UK-based bank was the first and so far the only foreign lender to issue IDRs. The issue sank to its lowest since debut a year ago after the Securities and Exchange Board of India (SEBI) said that the bank cannot convert IDRs into underlying shares. The fall in price did not benefit holders from arbitrage due to the price gap between Indian exchanges, where the IDRs are listed, and the London Stock Exchange or Hong Kong Stock Exchange, where the underlying shares are listed.
However, though the issue fell below expectations, it worked out perfectly well for the bank. “There were some investors who were counting on the arbitrage opportunity and did not get it but the IDR worked perfectly well for the bank,” said Bindra.
“We can only control the performance of Standard Chartered which has now shown ninth year of record profit,” he said.
Speaking on the recent Reserve Bank of India (RBI) guidelines on offering banking licences to corporates, Bindra said, “As long as the RBI can ensure that there is an arms length that is well enforced and there is an inclusive growth, more are welcome.”
(The writer’s travel and stay were sponsored by Indian Centre Foundation.)