The schme was notifed by Ministry of Finance Department Of Economic Affairs on 12th November, 1993 for facilitating issue of Foreign Currency Convertible Bonds and ordinary shares through Global Depositary Mechanism by Indian Companies. But the scheme is deemed to have come into force with effect from the first day of April, 1992.

means a banking company which acts as a custodian for the ordinary shares or foreign currency convertible bonds of an Indian Company which are issued by it against global depositary receipts or certificates;

means bonds issued in accordance with this scheme and subscribed by a non- resident in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments;

means any instrument in the form of a depositary receipt or certificate (by whatever name it is called) created by the Overseas Depositary Bank outside India and issued to non- resident investors against the issue of ordinary shares or Foreign Currency Convertible Bonds of issuing company;

means an Indian company permitted to issue Foreign Currency Convertible Bonds or ordinary shares of that company against Global Depositary Receipts;

means a bank authorised by the issuing company to issue global depositary receipts against issue of Foreign Currency Convertible Bonds or ordinary shares of the issuing company;

• An issuing company desirous of raising foreign funds by issuing Foreign Currency Convertible Bonds or ordinary shares for equity issues through Global Depositary Receipt is required to obtain prior permission of the Department of Economic Affairs, Ministry of Finance, Government of India.

• An issuing company seeking permission under sub- paragraph (1) shall have a consistent track record of good performance (financial or otherwise) for a minimum period of three years, on the basis of which an approval for finalising the issue structure would be issued to the company by the Department of Economic Affairs, Ministry of Finance.

On the completion of finalisation of issue structure in consultation with the Lead Manager to the issue, the issuing company shall obtain the final approval for proceeding ahead with the issue from the Department of Economic Affairs.

1. The Foreign Currency Convertible Bonds shall be denominated in any freely convertible foreign currency and the ordinary shares of an issuing company shall be denominated in Indian rupees.

2. When an issuing company issues ordinary shares or bonds under this Scheme, that company shall deliver the ordinary shares or bonds to a Domestic Custodian Bank who will, in terms of agreement, instruct the Overseas Depositary Bank to issue Global Depositary Receipt or Certificate to non-resident investors against the shares or bonds held by the Domestic Custodian Bank.

3. A Global Depositary Receipt may be issued in the negotiable form and may be listed on any international stock exchanges for trading outside India.

4. The provisions of any law relating to issue of capital by an Indian company shall apply in relation to the issue of Foreign Currency Convertible Bonds or the ordinary shares of an issuing company and the issuing company shall obtain the necessary permission or exemption from the appropriate authority under the relevant law relating to issue of capital.

The Ordinary shares and Foreign Currency Convertible Bonds issued against the Global Depository Receipts shall be treated as direct foreign investment in the issuing company. The aggregate of the foreign investment made either directly or indirectly (Through Global Depository Receipts Mechanism) shall not exceed 51% of the issued and subscribed capital of the issuing company. Provided that the investment made through Offshore Funds or by Foreign Institutional Investors will not form part of the limit laid down in this paragraph.

1. A Global Depository Receipt may be issued for one or more underlying shares or bonds held with the Domestic Custodian Bank.

2. The Foreign Currency Convertible Bonds and Global Depository Receipts may be denominated in any freely convertible foreign currency.

3. The ordinary shares underlying the Global Depository Receipts and the shares issued upon conversion of the Foreign Currency Convertible Bonds will be denominated only in Indian currency.

4. The following issue will be decided by the issuing company with the Lead Manager to the issue, namely:-

   1. Public or private placement;

   2. number of Global Depository Receipts to be issued;

   3. the issue price;

   4. the rate of interest payable on Foreign Currency Convertible Bonds; and

   5. the conversion price, coupon, and the pricing of the conversion options of the Foreign Currency Convertible Bonds.

5. There would be no lock-in-period for the Global Depository Receipts issued under this scheme.

The Global Depository Receipts issued under this scheme may be listed on any of the Overseas Stock Exchanges, or Over the Counter Exchanges or through Book Entry Transfer Systems prevalent abroad and such receipts may be purchased, possessed and freely transferable by a person who is a non-resident within the meaning of Section 2(q) of the Foreign Exchange Regulation Act, 1973 (46 of 1973) subject to the provisions of that Act.

1. A non-resident holder of Global Depository Receipts may transfer those receipts, or may ask the Overseas Depository Bank to redeem those receipts. In the case of redemption, Overseas Depository Bank shall request the Domestic Custodian Bank to get the corresponding underlying shares released in favour of the non-resident investor, for being sold directly on behalf of the non-resident, or being transferred in the books of account of the issuing company in the name of the non-resident.

2. In case of redemption of the Global Depository Receipts into underlying shares, a request for the same will be transmitted by the Overseas Depository Bank to the Domestic Custodian Bank in India, with a copy of the same being sent to the issuing company for information and record.

3. On redemption, the cost of acquisition of the shares underlying the Global Depository Receipts shall be reckoned as the cost on the date on which the Overseas Depository Bank advises the Domestic Custodian Bank for redemption. The price of the ordinary shares of the issuing company prevailing in the Bombay Stock Exchange or the National Stock Exchange on the date of the advice of redemption shall be taken as the cost of acquisition of the underlying ordinary shares.

4. For the purposed of conversion of Foreign Currency Convertible Bonds, the cost of acquisition in the hands of the non-resident investors would be the conversion price determined on the basis of the price of the shares at the Bombay Stock Exchange, or the National Stock Exchange, on the date of conversion of Foreign Currency Convertible Bonds into shares.

1. Interest payments on the bonds, until the conversion option is exercised, shall be subject to deduction of tax at source at the rate of ten per cent.

2. Tax on dividend on the converted portion of the bond shall be subject to deduction of tax at source at the rate of ten per cent.

3. Conversion of Foreign Currency Convertible Bonds into shares shall not give rise to any capital gains liable to income- tax in India.

4. Transfers of Foreign Currency Convertible Bonds made outside India by a non-resident investor to another non-resident investor shall not give rise to any capital gains liable to tax in India.

1. Under the provision of the Income-tax Act, income by way of dividend on shares will be taxed at the rate of 10 per cent. The issuing company shall transfer the dividend payment net after deducting tax at source to the Overseas Depositary Bank.

2. On receipt of these payments of dividend after taxation, the Overseas Depositary Bank shall distribute them to the non-resident investors proportionate to their holdings o Global Depositary Receipts evidencing the relevant shares, The holders of the Depositary Receipts may take credit of the tax deducted at source on the basis of the certification by the Overseas Depositary Bank, if permitted by the country of their residence.

3. All transactions of trading of the Global Depositary Receipts outside India, among non-resident investors, will be free from may liability to income tax in India on Capital Gains therefrom.

4. If any capital gains arise on the transfer of the aforesaid shares in India to the non-resident investor, he will be liable to income-tax under the provisions of the Income tax Act. If the aforesaid shares are held by the non-resident investor for a period of more than twelve months from the date of advice of their redemption by the Overseas Depositary Bank, the capital gains arising on the sale thereof will be treated as long-term capital gains and will be subject to income-tax at the rate of 10 per cent under the provisions of Section 115 AC of the Income tax Act. If such shares are held for a period of less than twelve months from the date of redemption advice, the capital gains arising on the sale thereof will be treated as short-term capital gains and will be subject to tax at the normal rates of income tax applicable to non-residents under the provisions of the Income-tax Act.

5. After redemption of the Depositary Receipts into underlying shares, during the period, if any, during which these shares are held by the redeeming non-resident foreign investor who has paid for these shares in foreign exchange at the time of purchased of the Global Depositary Receipt, the rate of taxation of income by way of dividends on these shares would continue to be at the rate of 10 per cent, in accordance with Section 115AC(1) of the Income tax Act. The long term capital gains on the sale of these redeemed underlying shares held by non-resident investors in the domestic market shall also be charged to tax at the rate of 10 per cent, in accordance with the provisions of Section 115 AC(1).

6. When the redeemed shares are sold on the Indian Stock Exchanges against payment in rupees, these shares shall go out of the purview of the Section 115 AC of the Income tax Act and income therefrom shall not be eligible for the concessional tax treatment provided thereunder. After the transfer of shares where consideration is in terms for rupees payment, the normal tax rates would apply to the income arising or accruing on these shares.

7. Deduction of tax at source on the amount of capital gains accruing on transfer of the shares would be made in accordance with section 195 and 196C of Income-tax Act.

1. During the period of fiduciary ownership of shares in the hands of the Overseas Depositary Bank, the provisions of Avoidance of Double Taxation Agreement entered into by the Government of India with the country of residence of the Overseas Depositary Bank will be applicable in the matter of taxation of income from dividends from underlying shares and interest in Foreign Currency Convertible Bonds.

2. During the period, if any, when the redeemed underlying shares are held by the non-resident investor on transfer from fiduciary ownership of the Overseas Depositary Bank, before they are should to resident purchasers, the Avoidance of Double Taxation Agreement entered into by the Government of India with the Country of residence of the non-resident investor will be applicable in the matter of taxation of income form the dividends from the said underlying shares, or interest on Foreign Currency Convertible Bonds, or any capital gain arising out of transfer of underlying shares.

The holding of the depositary receipts in the hands of non- resident investors and the holding of the underlying shares by the Overseas Depositary Bank in a fiduciary capacity and the transfer of the Global Depositary Receipts between non-resident investors and the Overseas Depositary Bank shall be exempt from Wealth Tax under the Wealth Tax Act, 1957 (27 of 1957), and from Gift Tax under the Gift Tax Act, 1958(18 of 1958).