The ministry notification said that all unlisted companies which fulfill the three year track record eligibility criteria can henceforth approach the overseas market through either GDR or ADR issues. Presently only listed companies which fulfill the three year track record criteria are allowed to approach the overseas market.

Analysts say the rationale for allowing unlisted companies to approach the overseas market is to enable Indian companies cash in on the boom in the overseas markets. The overseas markets are witnessing a boom currently and there are scores of companies in India especially in the software sector which are unlistedand which could jump up the graph with infusions of equity.

Freedom to approach the overseas markets will also enable companies to tap the primary market there at a time when the primary market here is almost dead and the secondary market extremely erratic. Analysts say that this freedom also addresses the complaint by firms that no finance is coming their way from markets or from financial institutions and banks.

For approaching the market concessions will be allowed to infrastructure companies with regard to the three year track record eligibility criteria. Companies in core areas as power generation, telecommunications, petroleum exploration and refining, ports, airports and roads will continue to avail of relaxations for making GDRs, ADRs and foreign currency convertible bond issues.

The ministry has also removed all end use restrictions on GDR and ADR issues. It is of the opinion that as GDRs and ADRs are full risk equity instruments with no repayment liability on the firm, it is not necessary tohave end use restrictions.

Companies will however not be allowed to invest these funds in the stock markets and real estate. The 90-day period from the date of approval by the ministry has been withdrawn. Companies can now obtain ministry permission and approach the market when they feel it is appropriate. The guidelines issued on June 19, 1996 had stipulated that both the in-principle and the final approval will be valid for 90 days from the date approvals are issued.

Access to capital markets abroad is important for unlisted companies especially because the domestic capital market is less than enthusiastic about new issues. Firms can now tap GDRs/ADRs on the strength of their fundamentals and thus finance expansion.