Indian IPO Market – Seven Reasons Why Investing in Standard Chartered IDR seems a Stupid Idea

There has been a lot of media hype around the Standard Chartered’s  Indian Depository Receipt (IDR) offering which is going to be a First for the Indian capital markets. However I have a lot of reservations regarding this investment and think its probably not a great  idea to invest in this stock . I am listing the reasons below

1. I can’t understand the rationale for why Standard Chartered is doing an IDR.”The issue will also increase our market visibility and brand profile, apart from giving Indian investors an opportunity to participate in our growth,” said Peter Sands, group chief executive.I can’t understand the logic of the above statement.If its a PR exercise why not buy some ad slots?
2. Dividends will be taxed at  30% in the hand of  the investors compared to  the zero tax for dividends from Indian shares.
3. Capital Gains tax of 30% in case of less than One year and 15% in case of more than a year .Compare that to 15% and 0% in case of Indian shares. Just this one point should be enough to scare away any investors in these shares.
4. Valuation of Standard Chartered does not seem  inexpensive compared to its peers in the developed markets.Its main claim to fame is greater exposure to emerging markets and less to developed markets ( is that not More Risky ?).Comparing it to Indian Banks,its growth rate is much lower  compared to the best of the breed  Indian private and public sector banks.Other bank performance parameters like Net Interest Margins (NIM) and credit growth also far behind that of Indian banks.
5. While I claim to have no great expertise to the asset quality and exposure of Standard Chartered , I would much rather avoid any any Exposure to Developed Markets. The recent concerns of Spanish banks make me wary of most developed market financial institutions.
6. IDR’s have distinct disadvantages with respect to voting ,conversion to shares etc.I would much rather invest in a share in the main HK exhange than the IDR here.In fact would make more sense for a person to invest in a Bank ETF in the developed markets rather than getting exposed to a single developed country bank through an IDR.
7. Standard Chartered is already listed on the HongKong and London exchanges and Listing in India has not made complete sense to me .The movement of the IDR will be dictated mainly by the share price movement of the HK and London exchanges.

You can also read about an indepth review of the StanChart IDR which I posted after writing this one.