A small review on the overseas sources of finance.

1. REVIEW ON THE OVERSEAS SOURCES
OF FINANCE FOR INDIAN CORPORATE
NAME: JITHO MONACHAN
MBA(BANKING AND FINANCE)
AMITY UNIVERSITY, MUMBAI

2. THE INDIAN CAPTIAL MARKET:
• The Indian capital market is the market for long term loanable funds as distinct from money market which deals in
short-term funds.
• It refers to the facilities and institutional arrangements for borrowing and lending ‘term funds’, medium term and long
term funds.
• The capital market is also divided in primary capital market and secondary capital market.
• The primary market refers to the new issue market, which relates to the issue of shares, preference shares, and
debentures of non-government public limited companies and also to the realising of fresh capital by government
companies, and the issue of public sector bonds.
• The secondary market on the other hand is the market for old and already issued securities. The secondary capital
market is composed of industrial security market or the stock exchange in which industrial securities are bought and
sold and the gilt- edged market in which the government and semi-government securities are traded.

4. EQUITY:
GLOBAL DEPOSITARY RECEIPT (GDR)
• A global depositary receipt is one type of depositary receipt. Like its name, it can be offered in several foreign countries
globally. Depositary receipts only offered in a single foreign market will typically be titled by that market’s name, such as
American depositary receipts, discussed below, and EDRs, LDRs, or IDRs.
• Global depositary receipts are typically part of a program that a company builds to issue their shares in foreign markets of more
than one country.
• For example, a Chinese company could create a GDR program that issues its shares through a depositary bank intermediary into
the London market and the United States market. Each issuance must comply with all relevant laws in both the home country
and foreign markets individually.

5. AMERICAN DEPOSITARY RECEIPT (ADR)
• American depositary receipts are shares issued in the U.S. from a foreign company through a depositary bank intermediary.
ADRs are only available in the United States.
• In general, a foreign company will work with a U.S. depositary bank as the intermediary for issuing and managing the shares.
• ADRs can be found on many exchanges in the U.S. including the New York Stock Exchange and Nasdaq as well as over the
counter. Foreign companies and their depositary bank intermediaries must comply with all U.S. laws for issuing ADRs. This
makes ADRs subject to U.S. securities laws as well as the rules of exchanges.
• For U.S. investors, ADRs can have some unique risks. Primarily the risk of currency found in conversion with the payment of
dividends. Otherwise, ADRs are denominated in U.S. dollars but their initial offering value is based on a valuation that is created
in terms of their home currency.

6. DEBT:
FX DENOMINATED BONDS
• YANKEE BONDS-
• A Yankee bond is a debt obligation denominated in U.S. dollars that is publicly issued in the U.S. by foreign banks and
corporation, and sometimes even governments.
• Yankee bonds are subject to U.S. securities laws, as they trade on U.S. exchanges.
• Yankee bonds offer the issuer to chance to get cheaper financing and reach a broader investment audience; they offer
investors the chance for better yields.
• On the downside, Yankee bonds can take a long time to come to market, subjecting them to interest rate risk; they are
also vulnerable to currency risk and other problems in their home country's economy.

8. • SAMURAI BONDS-
• Samurai bonds are issued in Japan by foreign companies, denominated in yen, and subject to Japanese regulations.
• Companies might issue bonds in yen to capitalize on low Japanese interest rates, or to gain exposure to Japanese
markets and investors.
• Risks associated with raising capital in Japanese yen can often be mitigated with cross-currency swaps and currency
forwards.
• Shogun bonds, like Samurai bonds, are bonds issued in Japan by foreign firms, but unlike Samurai bonds are denominated in
non-yen currencies.

10. DEBT:
INR DENOMINATION BONDS:
• MASALA BONDS-
• Masala bonds are bonds issued outside India but denominated in Indian Rupees, rather than the local currency. Masala is
an Indian word and it means spices.
• The term was used by the International Finance Corporation (IFC) to evoke the culture and cuisine of India. Unlike
dollar bonds, where the borrower takes the currency risk, Masala bond makes the investors bear the risk.
• The first Masala bond was issued by the World Bank- backed IFC in November 2014 when it raised 1,000 crore bond to
fund infrastructure projects in India. Later in August 2015 International Financial Cooperation for the first time issued
green masala bonds and raised Rupees 3.15 Billion to be used for private sector investments that address climate change
in India.

12. FOREIGN CURRENCY LOANS:
• A foreign currency loan is actually a speculative deal. The borrower hopes for interest and exchange rate advantages. But that is
a risky bet.
• A foreign currency loan means that you borrow money in a foreign currency, for example Swiss francs, and you have to repay
the loan in this currency as well.
• In practice, this is what happens: The bank obtains the loan sum in francs from a Swiss bank, converts it into euros and pays it
out to the borrower. To repay the loan plus interest, the borrower gives the bank euros, which it converts into francs and transfers
to the Swiss bank

13. EXTERNAL COMMERCIAL BORROWING:
• External commercial borrowing (ECBs) are loans in India made by non-resident lenders in foreign currency to Indian
borrowers. They are used widely in India to facilitate access to foreign money by Indian corporations and PSUs (public
sector undertakings).
• ECBs include commercial bank loans, buyers' credit, supliers' credit, securitised instruments such as floating rate notes
and fixed rate bonds etc., credit from official export credit agencies and commercial borrowings from the private sector
window of multilateral financial Institutions such as International Finance Corporation (Washington), ADB, AFIC,
CDC, etc.
• ECBs cannot be used for investment in stock market or speculation in real estate.
• The DEA (Department of Economic Affairs), Ministry of Finance, Government of India along with Reserve Bank of
India, monitors and regulates ECB guidelines and policies.

15. THANK YOU!!