Infosys American Depository Receipts (Adr) Final


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Infosys American Depository Receipts( ADR)

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Infosys American Depository Receipts (Adr) Final

  1. 1. Infosys American Depository Receipts (ADR)<br />Anshuman Jaiswal (G09051)<br />Charlton DCosta (G09053)<br />Deepti Chand (G09055)<br />GMP, XLRI, Jamshedpur<br />
  2. 2. What is ADR<br />Certificates that represent shares of a foreign stock owned and issued by a U.S bank<br />They buy up shares of the foreign stock and repackage them into securities which can be traded on the NYSE, NASDAQ or AMEX.<br />The foreign shares are usually held in custody overseas, but the certificates trade in the U.S. <br />They provide easy access to gaining international equities exposure without actually having to exchange currencies and open additional accounts to transact in overseas<br />GMP, XLRI, Jamshedpur<br />
  3. 3. TYPES OF ADR<br />Level 1 – Basic, common, traded on OTC, least regulation, no US accounting standard, no annual reports<br />Level 2 – Listed on stock exchange, higher trading volumes<br />Level 3 – Most rigorous regulations, go as far as raising capital from US investors<br />If the depository receipt is traded in the United States of America (USA), it is called an American Depository Receipt, or an ADR. <br />GMP, XLRI, Jamshedpur<br />
  4. 4. GDRs and IDRS<br />If the depository receipt is traded in a country other than USA, it is called a Global Depository Receipt<br /> GDR gives access to two or more markets<br />ADRs and GDRs are an excellent means of investment for NRIs & foreign nationals wanting to invest in India<br /> IDR is instrument in form of Depository Receipt created by the Indian depository in India against the underlying equity of investing company.<br />Foreign companies  Issue shares, to Indian Depository  Issue depository receipts.<br />The actual shares underlying the IDRs held by Overseas Custodian.<br />GMP, XLRI, Jamshedpur<br />
  5. 5. Issuance Process<br />GMP, XLRI, Jamshedpur<br />
  6. 6. ADR Termination<br />GMP, XLRI, Jamshedpur<br />
  7. 7. How to price ADR <br />Each ADR represent a single share, a fraction of shares or multiple shares.<br /> The depository bank sets the ratio of US ADRS per home country share. Ratio can be =1,<1 and >1<br />Once ADR priced & sold in the market, its price moves based on the market conditions <br />GMP, XLRI, Jamshedpur<br />
  8. 8. ADR: Companies/Shareholder's perspective<br />Disadvantages<br />Advantages<br />Limited selection<br />Liquidity<br />Exchange rate risk<br />Limited Diversification<br />Cost Effective<br />Hassle Free <br />Ease of Usage<br />Risk Diversification<br />Protection of Ownership<br />GMP, XLRI, Jamshedpur<br />
  9. 9. Summary of the Infosys ADRs issued<br />* % of share in the form of ADRs as on March 31, 2007<br />GMP, XLRI, Jamshedpur<br />
  10. 10. Infosys ADR: 11th March 1999<br />GMP, XLRI, Jamshedpur<br />
  11. 11. First Sponsored secondary ADS: July 31, 2003<br />GMP, XLRI, Jamshedpur<br />
  12. 12. Second sponsored secondary issue: May 2005<br />GMP, XLRI, Jamshedpur<br />
  13. 13. Third sponsored secondary issue: November 21, 2006<br />GMP, XLRI, Jamshedpur<br />
  14. 14. Reasons why ADR’s was overpriced<br />Excess demand with limited supply of ADR’s. <br />Few opportunities in the US to invest in companies that are growing at the 20–30% rates<br />Official barriers prevent foreign investors from buying the shares trading in India<br /> Returns are negatively correlated with other assets held by them.<br />ADR’s provides a value added layer – transparency, liquidity and greater coverage than the existing Indian stock.<br />GMP, XLRI, Jamshedpur<br />
  15. 15. Return Behavior :INFY ADS vs. NASDAQ vs. Infosys Tech<br />GMP, XLRI, Jamshedpur<br />
  16. 16. 10 year view<br />GMP, XLRI, Jamshedpur<br />
  17. 17. Factors Inducing Differences in Returns between Domestic Shares and ADRs<br />Time Difference<br /> Exchange Rates<br />Market Friction and Trading Restrictions<br /> Macro Events <br />GMP, XLRI, Jamshedpur<br />
  18. 18. THANK YOU!!<br />GMP, XLRI, Jamshedpur<br />