The Securities and Exchange Board of India is working on disclosure norms and eligibility criteria for foreign firms to raise funds in the domestic market through Indian depository receipts.

Sources said the capital markets regulator was going slow on the issue as it was working on a detailed investor protection guidelines for the foreign companies.

"If there is a vanishing company from overseas it would be very hard to track it," said an investment banking source familiar with the development.

The department of company affairs, which released its own guidelines in March this year for firms entering the IDR market, had set a requirement of $100 million paid-up capital and free reserves and an average turnover of $500 million over the three financial years preceding the issue.

But it is expected that Sebi might strengthen these norms. "The guidelines set by DCA are very broad and it is up to the Sebi to finalise the nitty-gritty," said the sources.

"While $100 million may be large for an Indian company, on a global context, it might not be a huge amount," they pointed out.

It is clear that the regulator, through stringent norms, wants to allow only the best of the companies to enter India and raise money here. Restrictions might also be placed on the companies' countries of origin.

It is also learnt that the regulator is more bothered about disclosures than about the eligibility criteria. It is making the disclosures as stringent as possible so that dubious companies do not make their way.

Further, the regulator is toying with the idea of asking for disclosures relating to the promoters' personal assets -- on the lines of the Sarbanes-Oxley Act.

Markets are expecting the setting up of IDR market to open the floodgates for companies set up by non-resident Indians.

However, if the Sebi raises eligibility criteria set by the DCA, NRI-promoted firms may find it tough to tap this market.

The DCA notification has also stipulated that the IDR issuer should have been a profit-making entity for the five successive years prior to making the issue and should have declared dividends of at least 10 per cent in every one of those five years. Moreover, it fixed a debt-equity ratio tentatively at a maximum of 2:1.

According to the DCA notification, the IDRs need not be listed on any overseas exchange and the issuer would only be required to list the securities in an Indian bourse. However, it made it mandatory for the issuer to have an established place of business in India.

This means that all the multinationals operating in India are theoretically eligible to raise capital in the country. Further, the DCA has set a one-year lock-in period, during when the issuer cannot redeem the receipts.