Retail investors are likely to get a 5% discount for Standard Chartered’s Indian Depository Receipts (IDR) issue. The bank, which is already listed on London and Hong Kong stock exchanges, is planning to raise $500-750 million from the Indian market via issue of 24 crore IDR’s. One IDR is equal to 10 shares and at last count, its share price was quoting at 16.9 pounds (Rs 1,121) on the LSE.

It has reserved 30% of the shares on offer for retail investors, another 50% for qualified institutional buyers (QIBs) and 18% for high net worth investors (HNIs). ?We have not yet determined the discount rate for retail investors. But we are looking at a 5% discount for them,? said Standard Chartered Plc group chief executive Peter Sands. The company will announce the price band for the offer on May 24, which will be based on the last traded price on the LSE. The company is planning to rope in anchor investors prior to the opening of the issue.

Interestingly, there is a tax googly for retail investors investing into IDRs. At present, there are no taxation provisions under the Income Tax Act with respect to taxation of IDRs and, therefore, would be subject to general provisions of IT Act. So, the tax exemptions and concessions which are currently available to investors holding equity shares of an Indian listed company will not be available for IDR holders.

While IDR’s will not subject to Securities Transaction Tax (STT) under the current Income Tax provisions, they will be liable to pay long term capital gain (LTCG) tax at the rate of 10.30% (without indexation) or 20.60% (with indexation). The concessional tax rate for short-term capital gains is not available and retail investors will be required to pay a maximum tax of 30.90%. IDR holders are also required to pay a fixed fee of $0.05 or less per share upon withdrawal of shares from the IDR facility and an additional fee of $0.016 per share for the services performed by the depository.The bank has hired UBS AG, Goldman Sachs, JM Financial Consultants, Bank of America-Merrill Lynch, Kotak Mahindra Capital and SBI Capital Markets to manage the offering.