Moreover, private placement of ADRs and GDRs would be eligible for automaticapproval provided the issue is lead managed by an investment banker,registered with the Securities and Exchange Commission in the US or underFinancial Services Act in UK, or appropriate regulatory authority in Europe,Singapore or Japan.

Under the liberalised guidelines would be only against expansion of theexisting capital base through issuance of fresh equity shares as underlyingshares for ADRs and GDRs. The automatic route for ADR and GDR would alsocover the issue of employee stock options by the Indian software companiesin the IT sector as per the guidelines issued earlier. The issue of ADRs andGDRs arising out of business reorganisation, merger and demerger would alsobe governed by automatic route subject to the earlier guidelines.

As ADR and GDR are reckoned as part of FDI, such issues will have to conformto the existing FDI policy and will apply to areas where FDI is permissible.In all cases of automatic approval, companies would be required to obtainmandatory clearance under the FDI policy and the Companies Act prior to theADR and GDR issues. Also, they will have to obtain the RBI approval underthe provisions of FERA/FEMA prior to an overseas issue.

The new guidelines stipulate that the companies will be required to furnishfull particulars to finance ministry and exchange control department of RBIwithin 30 days of completion of such transactions.

The new guidelines, the official note said, will extend to proposals whichhave already been filed with the finance ministry and also in cases wherein-principal approval has been obtained. Existing guidelines on Euro issuesproviding for the option of retention of issue proceeds or repatriation offunds into the country in anticipation of deployment towards the purposes,for which the funds was raised, would remain in force. Norms governingretention and deployment of funds abroad had already been prescribed byRBI.

With regard to end use of proceeds, the official press note said that theexisting bar on investments in stock markets and real estate would continue.The issue-related expenses (covering both fixed expenses like underwritingcommissions, lead managers' charges, legal expenses and other reimbursableexpenses) will be subject to a ceiling of four per cent in the case of GDRand seven per cent in the case of listing on US exchange. Issue expensesbeyond the ceiling would need the RBI approval.