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StanC not to undertake rights issue of IDRs on impediments

Standard Chartered while announcing its interim earnings statement on November 3 had said that loan losses continue to be a problem for its operations in India. It also blamed poor asset quality as one of major factors that dented its profits for the reported quarter.

November 18, 2015 / 10:02 PM IST

British major Standard Chartered today said it will not undertake the rights issue of Indian Depository Receipts (IDRs) due to procedural impediments and holders will be given a cash-out option.

"Due to certain procedural impediments, it (company) is not in a position to undertake the rights issue of IDRs in India, as there would be significant timing implications on the rights issue of shares in United Kingdom and Hong Kong," it said in a filing to the BSE. Therefore, it is not practicable to extend the rights offering to the IDR holders, the company said.


"Accordingly, the company has decided to provide the cash-out option (sale of the entitlement of the IDR holders to the underlying shares and distribution of the net proceeds for sale of such rights) to the IDR holders, similar to the 2010 rights offering," it added. The bank had issued IDRs in 2010.

However, earlier this month, Standard Chartered had said that it was examining the legal aspect whether IDR holders of the lender could participate in the planned USD 5.1 billion rights issue programme.


November 17 was fixed to determine the entitlement of holders of IDRs under the rights issue programme. But, the company has now fixed December 1 to determine the entitlements of the IDR holders for the cash-out option. The IDR holders of the company together have an entitlement to 1,714,285 new Standard Chartered shares.


"The rights of the IDR holders to these 1,714,285 new Standard Chartered shares will be sold and the proceeds (converted into Indian rupees), net of fees, foreign exchange costs and other expenses, will be distributed pro rata to the holders of IDRs entitled thereto," it said.

The Asia-focused British lender reported a loss of USD 139 million for the third September quarter as against a net profit of USD 1.5 billion in the year ago period.

Standard Chartered while announcing its interim earnings statement on November 3 had said that loan losses continue to be a problem for its operations in India. It also blamed poor asset quality as one of major factors that dented its profits for the reported quarter.

The bank has said that it will reduce its exposure to India, which from one the top most profit centres in recent past has been slipping since the early part of this decade. It is in the process of assessing the quality of the loan book and has taken a loan impairment charge of USD 1.2 billion for the quarter ended September.


It has also announced to cut up to 15,000 jobs globally. While, the cost cutting target has been raised to USD 2.9 billion between 2015 and 2018. The bank is now refocusing on its affluent retail clients than on its corporate and institutional banking businesses.

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It would also exit or restructure USD 100 billion of assets. In August, the bank had expressed disappointment with its India operations, saying the impact of reforms has been slower and corporates were still struggling.

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