ED probes over 2 dozen companies for suspected round-tripping via GDRs

The Enforcement Directorate has started a preliminary inquiry against over two dozen companies on suspicion of using global global depositary receipts (GDRs) to route black money into India, according to senior officials Moneycontrol spoke to.

The move comes after SEBI cracked down on several companies last year for GDR manipulation.

GDR is a popular financial instrument used by listed companies, globally as well as India, to raise funds denominated mostly in US dollar or euros.

A GDR is a bank certificate issued in more than one country backed by shares of a company, which are held by a foreign branch of an international bank. While shares trade on a domestic stock exchange, they can be offered for sale globally through the empaneled bank branches.

Authorities believe several Indian companies have used the route to carry out round-tripping of black money. The modus operandi typically involves creating an intricate web of entities in offshore locations for multi-layered transfers of funds before bringing them back to India.

While SEBI begins investigations when it suspects a violation of securities law, the ED steps in when there is suspicion of money laundering.

Another senior official told Moneycontrol that ED will coordinate with SEBI on this matter. “Some of the companies [on our list] are similar to those they have been investigating.”