In a bid to offer greater freedom to corporates in pricing their equity shares, the finance ministry has decided to ease the norms for issuance of foreign currency convertible bonds (FCCBs) and equity through ADRs (American Depository Receipts) and GDRs (Global Depository Receipts).

The move would facilitate companies in pricing securities at competitive rates in the current times of pessimistic markets.

As per the new norms, the pricing of ADR/GDR issues would be based on the stock prices prevailing in the domestic market in the past two weeks.

In a press release, the finance ministry said, “The pricing should not be less than the average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the ‘relevant date’.”

Up till now, the ADR/GDR issue price was being determined on the basis of the higher of the last ‘six’months’ average price or last 15 days’ average price.

A number of industrial lobbies were demanding a change in the pricing norms because in a bearish market, like the current one, where stock prices fall sharply, the issue price is much higher than the current market price.

It may be recalled that the market IPOs has dried up and the debt is also not forthcoming easily. So the new move of the government is not expected to provide immediate help to the struggling Indian companies at the times of ongoing global economic crises. Earlier this month, the Reserve Bank of India (RBI) permitted Indian companies to buy back their FCCBs with fresh foreign exchange resources or external commercial borrowings (ECBs).