Standard Chartered?s Indian depository receipts (IDR) has not been moving in sync with its underlying shares listed in London and Hong Kong, ever since it got listed. While the stock has gained 1% and 3% in London and Hong Kong, respectively, since June 11, 2010, the Standard Chartered?s IDR has fallen 1%, finds the FE study. Moreover, the Standard Chartered IDRs are quoting at a discount of 10% and 8%, respectively, to its equivalent share prices in London and Hong Kong. The IDR, which was issued at an offer price of Rs 104, was at about 6% discount to its then prices in London. ?The IDR may not exactly match the price in London but it will move in sync,? said Milind Barve, managing director, HDFC Mutual Fund.
The performance of Standard Chartered?s IDR continues to remain sluggish despite the overall markets performing well. The IDR has pared about 1% since the day of listing on June 11, 2010, while the benchmark equities have gained close to 3%.
Market experts believe the underperformance is due to the initial selling pressure post-listing. ?We have bought the IDR for the long-term structural benefits that Standard Chartered brings to the table in terms of Asian and developing market exposure. We are quite fine to keep it that way,? said Satish Ramanathan, head (equity) of Sundaram BNP Paribas, which is one of the anchor investors in the IDR.
Presently, Indian insurance companies are not permitted to invest in instruments such as the IDR. Also, retail investors don?t have same tax benefits that they normally have for holding shares for more than a year. Further, IDRs also attract a dividend distribution tax.
Deven Choksey, MD, KR Choksey Securities, further adds, ?Indian banks are available at attractive valuations and Standard Chartered doesn?t offer kind of business that Indian private banks have to offer.? In today?s trade on the Bombay Stock Exchange (BSE), the stock even fell to double digits at Rs 99.8, however, recovered substantially to close at Rs 103.