SlideShare a Scribd company logo
1 of 52
merican A DRs & lobal G FCCBs By: Deepak Verma
Introduction
Depositary Receipts??? ,[object Object]
The DR holders are part of foreign holding in a company but unlike FDI, investors in DRs do not enjoy voting rights
DRs of most Indian companies experienced a sharp fall due to market meltdown. However, recently the DRs have recovered and trading turnovers have improved.
DRs have become popular because of two-way fungibility
No prior approval of SEBI, RBI or government is required for issue of DRs
No restrictions on the use of proceeds except investment in real estate and the stock markets,[object Object]
Glossary… ADR means security issued by a bank or a depositary in USA against underlying rupee shares of a company incorporated in India. GDR means a security issued by a bank or a depository outside India against underlying rupee shares of a company incorporated in India. FCCB means a bond issued by a Indian Company expressed in foreign currency and the principal and interest in respect of which is payable in foreign currency. Investment banker means an investment banker registered with a securities and exchange commission in USA or the financial services authority in UK.
Authorities involved… SEC’s mission is to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. IOSCO’s mission is the protection of investors, ensuring that markets are fair, efficient and transparent and finally the reduction of systematic risk.
American Depository Receipt - I
What are ADRs??? Introduced by JPMorgan in 1927 Prices in US Dollar Dividends in US Dollar Traded like shares of US-based company ,[object Object],Involved banks: depository bank and investment bank Represents fraction of a share, single share or multiple shares of foreign stock
Composite ADR Index... 450 companies 39 countries Listed on NYSE AMEX NASDAQ Subsets: 3 Regional Indexes 4 Market indexes 3 Sector indexes 8 Selected Indexes 39 Country Indexes New ADR are added quarterly Index is rebalanced quarterly
Types... a) Unsponsored DR Issued by one or more depositories Based on market demand Trade on the „over-the-counter“ market No formal agreement b) Sponsored DR Designated depository acting as ist transfer agency Deposit Agreement or service contract Control over facilities Three levels Two restricted programs
Types... Level I Traded in the „over the counter“ (OTC) market & some exchange outside US  No full Securities and Exchange Commission (SEC) declosure No Generally Accepted Accounting Principles (GAAP) Security listed on one or more stock exchange in a foreign jurisdiction Only annual report on its homepage in English
Types... Level II (listed) Listed on U.S. exchange or quoted on NASDAQ Get higher visibility trading volume ,[object Object]
More under SEC regulation
File a form 20-F annually
Partial compliance with GAAP,[object Object]
File form 20-F annually
Complete compliance with GAAP
Addition: material information given to shareholder in home market, must be filed with the SEC through Form 8K,[object Object]
No regular shareholders
Less information for the public,[object Object]
Create an ADR... Investor decide to invest in an non-U.S. company Contacts broker to make a purchase Broker purchase actual ordinary shares to depositary bank‘s custodian in the foreign country Broker convert U.S. Dollar received from the investor into the foreign currency On same day shares are delivered to custodian bank Custodian notifies the depository bank DR are issued and delivered to broker Broker delivers DR to investor
Backup 3 regional indices (Europe, Asia, and Latin America) 4 market indices (Developed Markets, Emerging Markets, Euroland, and Telebras) 3 sector indices (Latin Telecom, European Telecom, and European Oil & Gas) 10 select indices (International 100, Developed Markets 100, Europe 100, Asia 50, China Select, Emerging Markets 50, Latin America 35, International Telecom 35, Small Cap Select and BRIC Select) 36 country indices
American Depository Receipts - II
How an ADR works? Dividends are paid  Custodian bank received it and witholds any foreign taxes Custodian bank changes currency into U.S. Dollar Custodian bank sends it to depositary bank Depositary bank sends this to investor
Level III ADR High Level II ADR Medium Program Visibility/ Liquidity Level II GDR and Level III GDR Level I ADR Level I  GDR Low Low Medium High Disclosure Requirements Generally, Increased Disclosure Results in Increased Visibility
Analysis...
Advantages... Flexibility to list on national exchange in the US Ability to raise capital Increase awareness of company Diversify portfolio Save money by reducing administration costs & avoiding foreign taxes on each transaction Trade is clear and settle in US Dollar
Disadvantages... Only small selection of ADRs available for trading Long time to receive information Depository bank charge fees & expenses for converting currency Country specific risk Currency exchange risk For diversification: enough funds to split in over 15 ADR Political and economical risks
Global Depository Receipts - I
GDRs… It is a certificate issued by a depository bank, which purchases shares of foreign companies and deposits it on the account. A financial instrument used by private markets to raise capital denominated in either U.S. dollars or euros.
Salient Features… Track Record Underlying shares Denomination Listing Settlement Lock-in Voting Dividend
Parties Involved… ISSUING COMPANY CUSTODIAN DEPOSITORY LEAD MANAGER UNDERWRITERS FOREIGN INVESTOR
Process… India ISSUER CO. CUSTODIAN Underlying shares Overseas DEPOSITORY Listed Foreign Stock Exchange Dividend Payment OVERSEAS INVESTORS
Global Depository Receipts - II
Statutory Requirements… Indian companies 	(i) A company must not be barred from raising funds from the Indian capital market nor restrained from accessing the securities market by SEBI. 	(ii) The applicant company must be a listed company or be in the process of getting listed on any Indian stock exchange.
Statutory Requirements… Subscribers 		Overseas Corporate Bodies (OCBs) and other entities, which are not eligible to invest in India through portfolio route i.e. directly on the stock exchanges in India and entities which are prohibited to buy, sell or deal in securities by SEBI are prohibited from subscribing to GDR issues.
FEMA guidelines in accordance with MoF Approval from MOF Not otherwise ineligible Issued in accordance with GDR schemes
Benefits To An Issuing Company Access to capital markets outside the home market. Enhancement of company visibility. Increase potential liquidity by enlarging the market for the company’s shares. It helps the issuing company to extend its research base to foreign countries.
Benefits to an Investor They facilitate diversification into foreign securities. Eliminate custody charges. Can be easily compared to securities of similar companies. Permit prompt dividend payments and corporate action notifications. GDRs offer most of the same corporate rights, especially voting rights, to the holders of GDRs.
Foreign Currency ConvertibleBonds - I
Definition by MoF… "Foreign Currency Convertible Bonds mean bonds issued in accordance with this scheme and subscribed by a non- resident in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments"
Eligibility… For listed companies: a) Eligibility of issuer:  An Indian Company, which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by the Securities and Exchange Board of India (SEBI) will not be eligible to issue Foreign Currency Convertible Bonds through Global Depositary Receipts under the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993. b) Eligibility of subscriber:  Erstwhile Overseas Corporate Bodies (OCBs) who are not eligible to invest in India through the portfolio route and entities prohibited to buy, sell or deal in securities by SEBI will not be eligible to subscribe to Foreign Currency Convertible Bonds and Global Depositary Receipts under the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993.
c) Pricing: The pricing of Global Depositary Receipt and Foreign Currency Convertible Bond issues should be made at a price not less than the higher of the following two averages:   (i)  The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date;  (ii)  The average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange during the two weeks preceding the relevant date. The "relevant date" means the date thirty days prior to the date on which the meeting of the general body of shareholders is held, in terms of section 81 (IA) of the Companies Act, 1956, to consider the proposed issue.
Eligibility… B. For unlisted companies        Unlisted companies, which have not yet accessed the Global Depositary Receipt / Foreign Currency Convertible Bond route for raising capital in the international market would require prior or simultaneous listing in the domestic market, while seeking to issue Foreign Currency Convertible Bonds and through Global Depositary Receipts under the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993.           It is clarified that unlisted companies, which have already issued Foreign Currency Convertible Bonds in the international market, would now require to list in the domestic market on making profit beginning financial year 2005-06 or within three years of such issue of Foreign Currency Convertible Bonds, whichever is earlier.
Foreign Currency Convertible Bonds - II
RBI Guidelines… FCCB can be raised under Automatic route . Minimum Average Maturity of FCCB shall be 3 years for borrowing up to US$ 20 million and 5 years in case it exceeds US$ 20 Million. Prepayment of FCCB is permitted upto US$ 200 Million subject to compliance of minimum  average maturity period .  For higher prepayment amount, RBI approval is needed. No Guarantee, Letter of Comfort, letter of Undertaking can be issued by Banks, FIIs or NBFC relating to FCCB .
Role of SEBI… An application for listing of the Bonds has to be made to the stock exchange of the country where the FCCBs are to be issued and traded .  Approval has to be obtained from the Indian Stock exchange to list the shares issued upon conversion of bonds, when the bondholder exercises the convertibility option. Filing the Offer Documents with SEBI , RBI and stock exchanges prior to FCCB issue.
Company Law Requirements… FCCBs are bonds issued by an Indian company expressed in foreign currency to non-resident investors, which fall under Debentures  . Prior intimation Notice should be given to listed Stock exchange, at least 7 days before the date of Board meeting in which the FCCB is to decided. Issuing Power of FCCBs is with the Board of Directors of the issuer Company . Convening a General Shareholders Meeting for procuring the shareholders consent with regard to the enhancement of borrowing powers of the Board .

More Related Content

What's hot

Depository receipts- ADR and GDR covered in this ppt
Depository receipts- ADR and GDR covered in this pptDepository receipts- ADR and GDR covered in this ppt
Depository receipts- ADR and GDR covered in this pptSundar B N
 
International bond market
International bond marketInternational bond market
International bond marketMayur Ingole
 
American depository receipt
American depository receiptAmerican depository receipt
American depository receiptkenzashamsudheen
 
Foreign exchange market in India
Foreign exchange market in IndiaForeign exchange market in India
Foreign exchange market in Indiahiten91
 
International financial market & instruments module 3
International financial market & instruments   module 3International financial market & instruments   module 3
International financial market & instruments module 3Vishnu Vijay
 
What is the Meaning of Financial Derivatives
What is the Meaning of Financial DerivativesWhat is the Meaning of Financial Derivatives
What is the Meaning of Financial DerivativesDhanashri Academy
 
Foreing exchange control objectives & features
Foreing exchange control objectives & featuresForeing exchange control objectives & features
Foreing exchange control objectives & featuresPrakyath Palan
 
Forward and Futures Contract
Forward and Futures ContractForward and Futures Contract
Forward and Futures ContractRana Zeshan
 
Hedge funds. a basic overview
Hedge funds. a basic overviewHedge funds. a basic overview
Hedge funds. a basic overviewMalik Law Group
 
88060433 international-money-market-instruments
88060433 international-money-market-instruments88060433 international-money-market-instruments
88060433 international-money-market-instrumentsGodrej & Boyce
 
case study on GLOBAL DEPOSITORY RECEIPTS
case study on GLOBAL DEPOSITORY RECEIPTScase study on GLOBAL DEPOSITORY RECEIPTS
case study on GLOBAL DEPOSITORY RECEIPTSmdkhankhan8
 
Foreign exchange risk and exposure
Foreign exchange risk and exposureForeign exchange risk and exposure
Foreign exchange risk and exposureKanchan Kandel
 
International Financial market
International Financial marketInternational Financial market
International Financial marketSudheer Gadde
 
Pricing forward & future contracts
Pricing forward & future contractsPricing forward & future contracts
Pricing forward & future contractsAmeya Ranadive
 
International financial markets
International financial marketsInternational financial markets
International financial marketsjainagawat
 
Interest rate parity 1
Interest rate parity 1Interest rate parity 1
Interest rate parity 1Anshu Singh
 

What's hot (20)

Depository receipts- ADR and GDR covered in this ppt
Depository receipts- ADR and GDR covered in this pptDepository receipts- ADR and GDR covered in this ppt
Depository receipts- ADR and GDR covered in this ppt
 
Derivatives
DerivativesDerivatives
Derivatives
 
International bond market
International bond marketInternational bond market
International bond market
 
American depository receipt
American depository receiptAmerican depository receipt
American depository receipt
 
Foreign exchange market in India
Foreign exchange market in IndiaForeign exchange market in India
Foreign exchange market in India
 
International financial market & instruments module 3
International financial market & instruments   module 3International financial market & instruments   module 3
International financial market & instruments module 3
 
What is the Meaning of Financial Derivatives
What is the Meaning of Financial DerivativesWhat is the Meaning of Financial Derivatives
What is the Meaning of Financial Derivatives
 
Foreing exchange control objectives & features
Foreing exchange control objectives & featuresForeing exchange control objectives & features
Foreing exchange control objectives & features
 
Foreign Institutional Investor
Foreign Institutional InvestorForeign Institutional Investor
Foreign Institutional Investor
 
Forward and Futures Contract
Forward and Futures ContractForward and Futures Contract
Forward and Futures Contract
 
Hedge funds. a basic overview
Hedge funds. a basic overviewHedge funds. a basic overview
Hedge funds. a basic overview
 
88060433 international-money-market-instruments
88060433 international-money-market-instruments88060433 international-money-market-instruments
88060433 international-money-market-instruments
 
case study on GLOBAL DEPOSITORY RECEIPTS
case study on GLOBAL DEPOSITORY RECEIPTScase study on GLOBAL DEPOSITORY RECEIPTS
case study on GLOBAL DEPOSITORY RECEIPTS
 
American depository receipts
American depository receiptsAmerican depository receipts
American depository receipts
 
Currency Exchange Risk
Currency Exchange Risk Currency Exchange Risk
Currency Exchange Risk
 
Foreign exchange risk and exposure
Foreign exchange risk and exposureForeign exchange risk and exposure
Foreign exchange risk and exposure
 
International Financial market
International Financial marketInternational Financial market
International Financial market
 
Pricing forward & future contracts
Pricing forward & future contractsPricing forward & future contracts
Pricing forward & future contracts
 
International financial markets
International financial marketsInternational financial markets
International financial markets
 
Interest rate parity 1
Interest rate parity 1Interest rate parity 1
Interest rate parity 1
 

Viewers also liked

Global Depositary Receipts
Global Depositary ReceiptsGlobal Depositary Receipts
Global Depositary ReceiptsRahul Tilak
 
Adr’s, gdr’s & fdi ppt
Adr’s, gdr’s & fdi ppt Adr’s, gdr’s & fdi ppt
Adr’s, gdr’s & fdi ppt Vijay Mehta
 
Infosys American Depository Receipts (Adr) Final
Infosys American Depository Receipts (Adr) FinalInfosys American Depository Receipts (Adr) Final
Infosys American Depository Receipts (Adr) FinalAnshuman Jaiswal
 
American depository receipts
American depository receiptsAmerican depository receipts
American depository receiptsTata Mutual Fund
 
Global depository receipt
Global depository receiptGlobal depository receipt
Global depository receiptHome
 

Viewers also liked (8)

Global Depositary Receipts
Global Depositary ReceiptsGlobal Depositary Receipts
Global Depositary Receipts
 
Adr’s, gdr’s & fdi ppt
Adr’s, gdr’s & fdi ppt Adr’s, gdr’s & fdi ppt
Adr’s, gdr’s & fdi ppt
 
Infosys American Depository Receipts (Adr) Final
Infosys American Depository Receipts (Adr) FinalInfosys American Depository Receipts (Adr) Final
Infosys American Depository Receipts (Adr) Final
 
ADR and GDR
ADR and GDRADR and GDR
ADR and GDR
 
American depository receipts
American depository receiptsAmerican depository receipts
American depository receipts
 
Adr and-gdr
Adr and-gdrAdr and-gdr
Adr and-gdr
 
Global depository receipt
Global depository receiptGlobal depository receipt
Global depository receipt
 
ADR and GDR
ADR and GDRADR and GDR
ADR and GDR
 

Similar to Depository Receipts

V- International Stock Market
V- International Stock MarketV- International Stock Market
V- International Stock MarketDayanand Huded
 
ADR and GDR : corporate financing
ADR and GDR : corporate financing ADR and GDR : corporate financing
ADR and GDR : corporate financing 92_neil
 
1264828 634582289833352500
1264828 6345822898333525001264828 634582289833352500
1264828 634582289833352500Rhea Ghosh
 
Review of Overseas Sources of Finance for Indian Corporate
Review of Overseas Sources of Finance for Indian CorporateReview of Overseas Sources of Finance for Indian Corporate
Review of Overseas Sources of Finance for Indian CorporateNikitaTiloomalani
 
International financing options
International financing optionsInternational financing options
International financing optionssharmahitanshu
 
Source of finance /uses/ reasons for its ups and downs
Source of finance /uses/ reasons for its ups and downsSource of finance /uses/ reasons for its ups and downs
Source of finance /uses/ reasons for its ups and downskamalsinha6
 
Global Depositary Receipt (GDR)
Global Depositary Receipt (GDR)Global Depositary Receipt (GDR)
Global Depositary Receipt (GDR)Mitsui & Co., Ltd.
 
Overseas Fund required by Indian Corporate
Overseas Fund required by Indian Corporate Overseas Fund required by Indian Corporate
Overseas Fund required by Indian Corporate FarazNaqvi12
 
ADR - American Depository Reciepts - Financial Regulations
ADR - American Depository Reciepts - Financial RegulationsADR - American Depository Reciepts - Financial Regulations
ADR - American Depository Reciepts - Financial RegulationsTanviDeshmukh23
 
External / Overseas sources of funds for MNCs by Anshika Singh
External / Overseas sources of funds for MNCs by Anshika SinghExternal / Overseas sources of funds for MNCs by Anshika Singh
External / Overseas sources of funds for MNCs by Anshika SinghAnshikaSingh141
 
Chapter 3 capital market
Chapter 3 capital marketChapter 3 capital market
Chapter 3 capital marketShivam Singhal
 
Securities Market
Securities MarketSecurities Market
Securities Marketkoolzub
 
ISSUANCE OF DEPOSITORY RECEIPTS
ISSUANCE OF DEPOSITORY RECEIPTSISSUANCE OF DEPOSITORY RECEIPTS
ISSUANCE OF DEPOSITORY RECEIPTSPavan Kumar Vijay
 
Indian depository receipts (IDR's) a glimpse
Indian depository receipts (IDR's) a glimpseIndian depository receipts (IDR's) a glimpse
Indian depository receipts (IDR's) a glimpseMallikarjun Bali
 
Overseas finance for indian corporate
Overseas finance for indian corporate Overseas finance for indian corporate
Overseas finance for indian corporate akhilsam
 
Overseas sources of finance of Indian corporate.
Overseas sources of finance of Indian corporate.Overseas sources of finance of Indian corporate.
Overseas sources of finance of Indian corporate.JugalRambhiya1
 

Similar to Depository Receipts (20)

ADR GDR IDR
ADR GDR IDRADR GDR IDR
ADR GDR IDR
 
Ppt overseas sources of finance
Ppt overseas sources of financePpt overseas sources of finance
Ppt overseas sources of finance
 
V- International Stock Market
V- International Stock MarketV- International Stock Market
V- International Stock Market
 
Depository reciepts
Depository recieptsDepository reciepts
Depository reciepts
 
ADR and GDR : corporate financing
ADR and GDR : corporate financing ADR and GDR : corporate financing
ADR and GDR : corporate financing
 
1264828 634582289833352500
1264828 6345822898333525001264828 634582289833352500
1264828 634582289833352500
 
Review of Overseas Sources of Finance for Indian Corporate
Review of Overseas Sources of Finance for Indian CorporateReview of Overseas Sources of Finance for Indian Corporate
Review of Overseas Sources of Finance for Indian Corporate
 
International financing options
International financing optionsInternational financing options
International financing options
 
Source of finance /uses/ reasons for its ups and downs
Source of finance /uses/ reasons for its ups and downsSource of finance /uses/ reasons for its ups and downs
Source of finance /uses/ reasons for its ups and downs
 
Global Depositary Receipt (GDR)
Global Depositary Receipt (GDR)Global Depositary Receipt (GDR)
Global Depositary Receipt (GDR)
 
Overseas Fund required by Indian Corporate
Overseas Fund required by Indian Corporate Overseas Fund required by Indian Corporate
Overseas Fund required by Indian Corporate
 
Adrgdrfinal
AdrgdrfinalAdrgdrfinal
Adrgdrfinal
 
ADR - American Depository Reciepts - Financial Regulations
ADR - American Depository Reciepts - Financial RegulationsADR - American Depository Reciepts - Financial Regulations
ADR - American Depository Reciepts - Financial Regulations
 
External / Overseas sources of funds for MNCs by Anshika Singh
External / Overseas sources of funds for MNCs by Anshika SinghExternal / Overseas sources of funds for MNCs by Anshika Singh
External / Overseas sources of funds for MNCs by Anshika Singh
 
Chapter 3 capital market
Chapter 3 capital marketChapter 3 capital market
Chapter 3 capital market
 
Securities Market
Securities MarketSecurities Market
Securities Market
 
ISSUANCE OF DEPOSITORY RECEIPTS
ISSUANCE OF DEPOSITORY RECEIPTSISSUANCE OF DEPOSITORY RECEIPTS
ISSUANCE OF DEPOSITORY RECEIPTS
 
Indian depository receipts (IDR's) a glimpse
Indian depository receipts (IDR's) a glimpseIndian depository receipts (IDR's) a glimpse
Indian depository receipts (IDR's) a glimpse
 
Overseas finance for indian corporate
Overseas finance for indian corporate Overseas finance for indian corporate
Overseas finance for indian corporate
 
Overseas sources of finance of Indian corporate.
Overseas sources of finance of Indian corporate.Overseas sources of finance of Indian corporate.
Overseas sources of finance of Indian corporate.
 

More from Deepak S. Verma

Environmental Psychology (BPCE 143) - Solved Assignment
Environmental Psychology (BPCE 143) - Solved AssignmentEnvironmental Psychology (BPCE 143) - Solved Assignment
Environmental Psychology (BPCE 143) - Solved AssignmentDeepak S. Verma
 
Forensic Psychology (BPCE 142) - Solved Assignment
Forensic Psychology (BPCE 142) - Solved AssignmentForensic Psychology (BPCE 142) - Solved Assignment
Forensic Psychology (BPCE 142) - Solved AssignmentDeepak S. Verma
 
Positive Psychology (BPCE 141) - Solved Assignment
Positive Psychology (BPCE 141) - Solved AssignmentPositive Psychology (BPCE 141) - Solved Assignment
Positive Psychology (BPCE 141) - Solved AssignmentDeepak S. Verma
 
Counselling Psychology (BPCC 114) - Solved Assignment
Counselling Psychology (BPCC 114) - Solved AssignmentCounselling Psychology (BPCC 114) - Solved Assignment
Counselling Psychology (BPCC 114) - Solved AssignmentDeepak S. Verma
 
Understanding and Dealing with Psychological Disorders (BPCC 113) - Solved As...
Understanding and Dealing with Psychological Disorders (BPCC 113) - Solved As...Understanding and Dealing with Psychological Disorders (BPCC 113) - Solved As...
Understanding and Dealing with Psychological Disorders (BPCC 113) - Solved As...Deepak S. Verma
 
Organizational Behaviour (BPCC 112) - Solved Assignment
Organizational Behaviour (BPCC 112) - Solved AssignmentOrganizational Behaviour (BPCC 112) - Solved Assignment
Organizational Behaviour (BPCC 112) - Solved AssignmentDeepak S. Verma
 
Understanding Psychological Disorders (BPCC 111) - Solved Assignment
Understanding Psychological Disorders (BPCC 111) - Solved AssignmentUnderstanding Psychological Disorders (BPCC 111) - Solved Assignment
Understanding Psychological Disorders (BPCC 111) - Solved AssignmentDeepak S. Verma
 
Rethinking Development (BSOG 173) - Solved Assignment
Rethinking Development (BSOG 173) - Solved AssignmentRethinking Development (BSOG 173) - Solved Assignment
Rethinking Development (BSOG 173) - Solved AssignmentDeepak S. Verma
 
Emotional Intelligence (BPCS 183) - Solved Assignment
Emotional Intelligence (BPCS 183) - Solved AssignmentEmotional Intelligence (BPCS 183) - Solved Assignment
Emotional Intelligence (BPCS 183) - Solved AssignmentDeepak S. Verma
 
Creative Writing (BEGG 174) - Solved Assignment
Creative Writing (BEGG 174) - Solved AssignmentCreative Writing (BEGG 174) - Solved Assignment
Creative Writing (BEGG 174) - Solved AssignmentDeepak S. Verma
 
Data Analysis (BECS 184) - Solved Assignment
Data Analysis (BECS 184) - Solved AssignmentData Analysis (BECS 184) - Solved Assignment
Data Analysis (BECS 184) - Solved AssignmentDeepak S. Verma
 
Applied Social Psychology (BPCC 110) - Solved Assignment
Applied Social Psychology (BPCC 110) - Solved AssignmentApplied Social Psychology (BPCC 110) - Solved Assignment
Applied Social Psychology (BPCC 110) - Solved AssignmentDeepak S. Verma
 
Developmental Psychology (BPCC 109) - Solved Assignment
Developmental Psychology (BPCC 109) - Solved AssignmentDevelopmental Psychology (BPCC 109) - Solved Assignment
Developmental Psychology (BPCC 109) - Solved AssignmentDeepak S. Verma
 
Statistical Methods for Psychological Research (BPCC 108) - Solved Assignment
Statistical Methods for Psychological Research (BPCC 108) - Solved AssignmentStatistical Methods for Psychological Research (BPCC 108) - Solved Assignment
Statistical Methods for Psychological Research (BPCC 108) - Solved AssignmentDeepak S. Verma
 
Social Psychology (BPCC 107) - Solved Assignment
Social Psychology (BPCC 107) - Solved AssignmentSocial Psychology (BPCC 107) - Solved Assignment
Social Psychology (BPCC 107) - Solved AssignmentDeepak S. Verma
 
Development of Psychological Thought (BPCC 106) - Solved Assignment
Development of Psychological Thought (BPCC 106) - Solved AssignmentDevelopment of Psychological Thought (BPCC 106) - Solved Assignment
Development of Psychological Thought (BPCC 106) - Solved AssignmentDeepak S. Verma
 
Psychological Research (BPCC 105) - Solved Assignment
Psychological Research (BPCC 105) - Solved AssignmentPsychological Research (BPCC 105) - Solved Assignment
Psychological Research (BPCC 105) - Solved AssignmentDeepak S. Verma
 
English Communication (BEGAE 182) - Solved Assignment
English Communication (BEGAE 182) - Solved AssignmentEnglish Communication (BEGAE 182) - Solved Assignment
English Communication (BEGAE 182) - Solved AssignmentDeepak S. Verma
 
AECC on Environment Studies (BEVAE 181) - Solved Assignment
AECC on Environment Studies (BEVAE 181) - Solved AssignmentAECC on Environment Studies (BEVAE 181) - Solved Assignment
AECC on Environment Studies (BEVAE 181) - Solved AssignmentDeepak S. Verma
 
Gender Sensitization: Society & Culture (BGDG172) - Solved Assignment
Gender Sensitization: Society & Culture (BGDG172) - Solved AssignmentGender Sensitization: Society & Culture (BGDG172) - Solved Assignment
Gender Sensitization: Society & Culture (BGDG172) - Solved AssignmentDeepak S. Verma
 

More from Deepak S. Verma (20)

Environmental Psychology (BPCE 143) - Solved Assignment
Environmental Psychology (BPCE 143) - Solved AssignmentEnvironmental Psychology (BPCE 143) - Solved Assignment
Environmental Psychology (BPCE 143) - Solved Assignment
 
Forensic Psychology (BPCE 142) - Solved Assignment
Forensic Psychology (BPCE 142) - Solved AssignmentForensic Psychology (BPCE 142) - Solved Assignment
Forensic Psychology (BPCE 142) - Solved Assignment
 
Positive Psychology (BPCE 141) - Solved Assignment
Positive Psychology (BPCE 141) - Solved AssignmentPositive Psychology (BPCE 141) - Solved Assignment
Positive Psychology (BPCE 141) - Solved Assignment
 
Counselling Psychology (BPCC 114) - Solved Assignment
Counselling Psychology (BPCC 114) - Solved AssignmentCounselling Psychology (BPCC 114) - Solved Assignment
Counselling Psychology (BPCC 114) - Solved Assignment
 
Understanding and Dealing with Psychological Disorders (BPCC 113) - Solved As...
Understanding and Dealing with Psychological Disorders (BPCC 113) - Solved As...Understanding and Dealing with Psychological Disorders (BPCC 113) - Solved As...
Understanding and Dealing with Psychological Disorders (BPCC 113) - Solved As...
 
Organizational Behaviour (BPCC 112) - Solved Assignment
Organizational Behaviour (BPCC 112) - Solved AssignmentOrganizational Behaviour (BPCC 112) - Solved Assignment
Organizational Behaviour (BPCC 112) - Solved Assignment
 
Understanding Psychological Disorders (BPCC 111) - Solved Assignment
Understanding Psychological Disorders (BPCC 111) - Solved AssignmentUnderstanding Psychological Disorders (BPCC 111) - Solved Assignment
Understanding Psychological Disorders (BPCC 111) - Solved Assignment
 
Rethinking Development (BSOG 173) - Solved Assignment
Rethinking Development (BSOG 173) - Solved AssignmentRethinking Development (BSOG 173) - Solved Assignment
Rethinking Development (BSOG 173) - Solved Assignment
 
Emotional Intelligence (BPCS 183) - Solved Assignment
Emotional Intelligence (BPCS 183) - Solved AssignmentEmotional Intelligence (BPCS 183) - Solved Assignment
Emotional Intelligence (BPCS 183) - Solved Assignment
 
Creative Writing (BEGG 174) - Solved Assignment
Creative Writing (BEGG 174) - Solved AssignmentCreative Writing (BEGG 174) - Solved Assignment
Creative Writing (BEGG 174) - Solved Assignment
 
Data Analysis (BECS 184) - Solved Assignment
Data Analysis (BECS 184) - Solved AssignmentData Analysis (BECS 184) - Solved Assignment
Data Analysis (BECS 184) - Solved Assignment
 
Applied Social Psychology (BPCC 110) - Solved Assignment
Applied Social Psychology (BPCC 110) - Solved AssignmentApplied Social Psychology (BPCC 110) - Solved Assignment
Applied Social Psychology (BPCC 110) - Solved Assignment
 
Developmental Psychology (BPCC 109) - Solved Assignment
Developmental Psychology (BPCC 109) - Solved AssignmentDevelopmental Psychology (BPCC 109) - Solved Assignment
Developmental Psychology (BPCC 109) - Solved Assignment
 
Statistical Methods for Psychological Research (BPCC 108) - Solved Assignment
Statistical Methods for Psychological Research (BPCC 108) - Solved AssignmentStatistical Methods for Psychological Research (BPCC 108) - Solved Assignment
Statistical Methods for Psychological Research (BPCC 108) - Solved Assignment
 
Social Psychology (BPCC 107) - Solved Assignment
Social Psychology (BPCC 107) - Solved AssignmentSocial Psychology (BPCC 107) - Solved Assignment
Social Psychology (BPCC 107) - Solved Assignment
 
Development of Psychological Thought (BPCC 106) - Solved Assignment
Development of Psychological Thought (BPCC 106) - Solved AssignmentDevelopment of Psychological Thought (BPCC 106) - Solved Assignment
Development of Psychological Thought (BPCC 106) - Solved Assignment
 
Psychological Research (BPCC 105) - Solved Assignment
Psychological Research (BPCC 105) - Solved AssignmentPsychological Research (BPCC 105) - Solved Assignment
Psychological Research (BPCC 105) - Solved Assignment
 
English Communication (BEGAE 182) - Solved Assignment
English Communication (BEGAE 182) - Solved AssignmentEnglish Communication (BEGAE 182) - Solved Assignment
English Communication (BEGAE 182) - Solved Assignment
 
AECC on Environment Studies (BEVAE 181) - Solved Assignment
AECC on Environment Studies (BEVAE 181) - Solved AssignmentAECC on Environment Studies (BEVAE 181) - Solved Assignment
AECC on Environment Studies (BEVAE 181) - Solved Assignment
 
Gender Sensitization: Society & Culture (BGDG172) - Solved Assignment
Gender Sensitization: Society & Culture (BGDG172) - Solved AssignmentGender Sensitization: Society & Culture (BGDG172) - Solved Assignment
Gender Sensitization: Society & Culture (BGDG172) - Solved Assignment
 

Recently uploaded

L1 2024 Prequisite QM persion milad1371.pdf
L1 2024 Prequisite QM persion milad1371.pdfL1 2024 Prequisite QM persion milad1371.pdf
L1 2024 Prequisite QM persion milad1371.pdfmiladsojoudi211
 
1. Elemental Economics - Introduction to mining
1. Elemental Economics - Introduction to mining1. Elemental Economics - Introduction to mining
1. Elemental Economics - Introduction to miningNeal Brewster
 
Consumer rights and its importance and value
Consumer rights and its importance and valueConsumer rights and its importance and value
Consumer rights and its importance and valuehemalella
 
Indirect tax .pptx Supply under GST, Charges of GST
Indirect tax .pptx  Supply under GST, Charges of GSTIndirect tax .pptx  Supply under GST, Charges of GST
Indirect tax .pptx Supply under GST, Charges of GSTmeghnagandhi5574
 
Monthly Market Risk Update: May 2024 [SlideShare]
Monthly Market Risk Update: May 2024 [SlideShare]Monthly Market Risk Update: May 2024 [SlideShare]
Monthly Market Risk Update: May 2024 [SlideShare]Commonwealth
 
Rapport annuel de Encevo Group pour l'année 2023
Rapport annuel de Encevo Group pour l'année 2023Rapport annuel de Encevo Group pour l'année 2023
Rapport annuel de Encevo Group pour l'année 2023Paperjam_redaction
 
New Stratus Corporate Presentation May 2024
New Stratus Corporate Presentation May 2024New Stratus Corporate Presentation May 2024
New Stratus Corporate Presentation May 2024Adnet Communications
 
What exchange can I sell my pi coins in 2024
What exchange can I sell my pi coins in 2024What exchange can I sell my pi coins in 2024
What exchange can I sell my pi coins in 2024DOT TECH
 
Managing personal finances wisely for financial stability and
Managing personal finances wisely for financial stability  andManaging personal finances wisely for financial stability  and
Managing personal finances wisely for financial stability andraqibmifysolutions
 
一比一原版(KPU毕业证书)昆特兰理工大学毕业证成绩单学位证书
一比一原版(KPU毕业证书)昆特兰理工大学毕业证成绩单学位证书一比一原版(KPU毕业证书)昆特兰理工大学毕业证成绩单学位证书
一比一原版(KPU毕业证书)昆特兰理工大学毕业证成绩单学位证书atedyxc
 
Bahawalpur Culture.pptx pptx pptx pttx pttx
Bahawalpur Culture.pptx pptx pptx pttx pttxBahawalpur Culture.pptx pptx pptx pttx pttx
Bahawalpur Culture.pptx pptx pptx pttx pttxAbdulNasirNichari
 
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书atedyxc
 
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书atedyxc
 
一比一原版(SFU毕业证书)西蒙菲莎大学毕业证成绩单学位证书
一比一原版(SFU毕业证书)西蒙菲莎大学毕业证成绩单学位证书一比一原版(SFU毕业证书)西蒙菲莎大学毕业证成绩单学位证书
一比一原版(SFU毕业证书)西蒙菲莎大学毕业证成绩单学位证书atedyxc
 
wiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdfwiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdfallysaamping
 
how to exchange pi coins for USD in 2024.
how to exchange pi coins for USD in 2024.how to exchange pi coins for USD in 2024.
how to exchange pi coins for USD in 2024.DOT TECH
 
how do i convert pi coins to usdt easily.
how do i convert pi coins to usdt easily.how do i convert pi coins to usdt easily.
how do i convert pi coins to usdt easily.DOT TECH
 
how do I cash out pi network coin in 2024.
how do I cash out pi network coin in 2024.how do I cash out pi network coin in 2024.
how do I cash out pi network coin in 2024.DOT TECH
 
DSP Gold ETF Fund of Fund PPT - April'2024
DSP Gold ETF Fund of Fund PPT - April'2024DSP Gold ETF Fund of Fund PPT - April'2024
DSP Gold ETF Fund of Fund PPT - April'2024DSP Mutual Fund
 
How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024DOT TECH
 

Recently uploaded (20)

L1 2024 Prequisite QM persion milad1371.pdf
L1 2024 Prequisite QM persion milad1371.pdfL1 2024 Prequisite QM persion milad1371.pdf
L1 2024 Prequisite QM persion milad1371.pdf
 
1. Elemental Economics - Introduction to mining
1. Elemental Economics - Introduction to mining1. Elemental Economics - Introduction to mining
1. Elemental Economics - Introduction to mining
 
Consumer rights and its importance and value
Consumer rights and its importance and valueConsumer rights and its importance and value
Consumer rights and its importance and value
 
Indirect tax .pptx Supply under GST, Charges of GST
Indirect tax .pptx  Supply under GST, Charges of GSTIndirect tax .pptx  Supply under GST, Charges of GST
Indirect tax .pptx Supply under GST, Charges of GST
 
Monthly Market Risk Update: May 2024 [SlideShare]
Monthly Market Risk Update: May 2024 [SlideShare]Monthly Market Risk Update: May 2024 [SlideShare]
Monthly Market Risk Update: May 2024 [SlideShare]
 
Rapport annuel de Encevo Group pour l'année 2023
Rapport annuel de Encevo Group pour l'année 2023Rapport annuel de Encevo Group pour l'année 2023
Rapport annuel de Encevo Group pour l'année 2023
 
New Stratus Corporate Presentation May 2024
New Stratus Corporate Presentation May 2024New Stratus Corporate Presentation May 2024
New Stratus Corporate Presentation May 2024
 
What exchange can I sell my pi coins in 2024
What exchange can I sell my pi coins in 2024What exchange can I sell my pi coins in 2024
What exchange can I sell my pi coins in 2024
 
Managing personal finances wisely for financial stability and
Managing personal finances wisely for financial stability  andManaging personal finances wisely for financial stability  and
Managing personal finances wisely for financial stability and
 
一比一原版(KPU毕业证书)昆特兰理工大学毕业证成绩单学位证书
一比一原版(KPU毕业证书)昆特兰理工大学毕业证成绩单学位证书一比一原版(KPU毕业证书)昆特兰理工大学毕业证成绩单学位证书
一比一原版(KPU毕业证书)昆特兰理工大学毕业证成绩单学位证书
 
Bahawalpur Culture.pptx pptx pptx pttx pttx
Bahawalpur Culture.pptx pptx pptx pttx pttxBahawalpur Culture.pptx pptx pptx pttx pttx
Bahawalpur Culture.pptx pptx pptx pttx pttx
 
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
 
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书
 
一比一原版(SFU毕业证书)西蒙菲莎大学毕业证成绩单学位证书
一比一原版(SFU毕业证书)西蒙菲莎大学毕业证成绩单学位证书一比一原版(SFU毕业证书)西蒙菲莎大学毕业证成绩单学位证书
一比一原版(SFU毕业证书)西蒙菲莎大学毕业证成绩单学位证书
 
wiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdfwiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdf
 
how to exchange pi coins for USD in 2024.
how to exchange pi coins for USD in 2024.how to exchange pi coins for USD in 2024.
how to exchange pi coins for USD in 2024.
 
how do i convert pi coins to usdt easily.
how do i convert pi coins to usdt easily.how do i convert pi coins to usdt easily.
how do i convert pi coins to usdt easily.
 
how do I cash out pi network coin in 2024.
how do I cash out pi network coin in 2024.how do I cash out pi network coin in 2024.
how do I cash out pi network coin in 2024.
 
DSP Gold ETF Fund of Fund PPT - April'2024
DSP Gold ETF Fund of Fund PPT - April'2024DSP Gold ETF Fund of Fund PPT - April'2024
DSP Gold ETF Fund of Fund PPT - April'2024
 
How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024
 

Depository Receipts

  • 1. merican A DRs & lobal G FCCBs By: Deepak Verma
  • 3.
  • 4. The DR holders are part of foreign holding in a company but unlike FDI, investors in DRs do not enjoy voting rights
  • 5. DRs of most Indian companies experienced a sharp fall due to market meltdown. However, recently the DRs have recovered and trading turnovers have improved.
  • 6. DRs have become popular because of two-way fungibility
  • 7. No prior approval of SEBI, RBI or government is required for issue of DRs
  • 8.
  • 9. Glossary… ADR means security issued by a bank or a depositary in USA against underlying rupee shares of a company incorporated in India. GDR means a security issued by a bank or a depository outside India against underlying rupee shares of a company incorporated in India. FCCB means a bond issued by a Indian Company expressed in foreign currency and the principal and interest in respect of which is payable in foreign currency. Investment banker means an investment banker registered with a securities and exchange commission in USA or the financial services authority in UK.
  • 10. Authorities involved… SEC’s mission is to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. IOSCO’s mission is the protection of investors, ensuring that markets are fair, efficient and transparent and finally the reduction of systematic risk.
  • 12.
  • 13. Composite ADR Index... 450 companies 39 countries Listed on NYSE AMEX NASDAQ Subsets: 3 Regional Indexes 4 Market indexes 3 Sector indexes 8 Selected Indexes 39 Country Indexes New ADR are added quarterly Index is rebalanced quarterly
  • 14. Types... a) Unsponsored DR Issued by one or more depositories Based on market demand Trade on the „over-the-counter“ market No formal agreement b) Sponsored DR Designated depository acting as ist transfer agency Deposit Agreement or service contract Control over facilities Three levels Two restricted programs
  • 15. Types... Level I Traded in the „over the counter“ (OTC) market & some exchange outside US No full Securities and Exchange Commission (SEC) declosure No Generally Accepted Accounting Principles (GAAP) Security listed on one or more stock exchange in a foreign jurisdiction Only annual report on its homepage in English
  • 16.
  • 17. More under SEC regulation
  • 18. File a form 20-F annually
  • 19.
  • 20. File form 20-F annually
  • 22.
  • 24.
  • 25. Create an ADR... Investor decide to invest in an non-U.S. company Contacts broker to make a purchase Broker purchase actual ordinary shares to depositary bank‘s custodian in the foreign country Broker convert U.S. Dollar received from the investor into the foreign currency On same day shares are delivered to custodian bank Custodian notifies the depository bank DR are issued and delivered to broker Broker delivers DR to investor
  • 26. Backup 3 regional indices (Europe, Asia, and Latin America) 4 market indices (Developed Markets, Emerging Markets, Euroland, and Telebras) 3 sector indices (Latin Telecom, European Telecom, and European Oil & Gas) 10 select indices (International 100, Developed Markets 100, Europe 100, Asia 50, China Select, Emerging Markets 50, Latin America 35, International Telecom 35, Small Cap Select and BRIC Select) 36 country indices
  • 28. How an ADR works? Dividends are paid Custodian bank received it and witholds any foreign taxes Custodian bank changes currency into U.S. Dollar Custodian bank sends it to depositary bank Depositary bank sends this to investor
  • 29. Level III ADR High Level II ADR Medium Program Visibility/ Liquidity Level II GDR and Level III GDR Level I ADR Level I GDR Low Low Medium High Disclosure Requirements Generally, Increased Disclosure Results in Increased Visibility
  • 31. Advantages... Flexibility to list on national exchange in the US Ability to raise capital Increase awareness of company Diversify portfolio Save money by reducing administration costs & avoiding foreign taxes on each transaction Trade is clear and settle in US Dollar
  • 32. Disadvantages... Only small selection of ADRs available for trading Long time to receive information Depository bank charge fees & expenses for converting currency Country specific risk Currency exchange risk For diversification: enough funds to split in over 15 ADR Political and economical risks
  • 34. GDRs… It is a certificate issued by a depository bank, which purchases shares of foreign companies and deposits it on the account. A financial instrument used by private markets to raise capital denominated in either U.S. dollars or euros.
  • 35. Salient Features… Track Record Underlying shares Denomination Listing Settlement Lock-in Voting Dividend
  • 36. Parties Involved… ISSUING COMPANY CUSTODIAN DEPOSITORY LEAD MANAGER UNDERWRITERS FOREIGN INVESTOR
  • 37. Process… India ISSUER CO. CUSTODIAN Underlying shares Overseas DEPOSITORY Listed Foreign Stock Exchange Dividend Payment OVERSEAS INVESTORS
  • 39. Statutory Requirements… Indian companies (i) A company must not be barred from raising funds from the Indian capital market nor restrained from accessing the securities market by SEBI. (ii) The applicant company must be a listed company or be in the process of getting listed on any Indian stock exchange.
  • 40. Statutory Requirements… Subscribers Overseas Corporate Bodies (OCBs) and other entities, which are not eligible to invest in India through portfolio route i.e. directly on the stock exchanges in India and entities which are prohibited to buy, sell or deal in securities by SEBI are prohibited from subscribing to GDR issues.
  • 41. FEMA guidelines in accordance with MoF Approval from MOF Not otherwise ineligible Issued in accordance with GDR schemes
  • 42. Benefits To An Issuing Company Access to capital markets outside the home market. Enhancement of company visibility. Increase potential liquidity by enlarging the market for the company’s shares. It helps the issuing company to extend its research base to foreign countries.
  • 43. Benefits to an Investor They facilitate diversification into foreign securities. Eliminate custody charges. Can be easily compared to securities of similar companies. Permit prompt dividend payments and corporate action notifications. GDRs offer most of the same corporate rights, especially voting rights, to the holders of GDRs.
  • 45. Definition by MoF… "Foreign Currency Convertible Bonds mean bonds issued in accordance with this scheme and subscribed by a non- resident in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments"
  • 46. Eligibility… For listed companies: a) Eligibility of issuer:  An Indian Company, which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by the Securities and Exchange Board of India (SEBI) will not be eligible to issue Foreign Currency Convertible Bonds through Global Depositary Receipts under the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993. b) Eligibility of subscriber:  Erstwhile Overseas Corporate Bodies (OCBs) who are not eligible to invest in India through the portfolio route and entities prohibited to buy, sell or deal in securities by SEBI will not be eligible to subscribe to Foreign Currency Convertible Bonds and Global Depositary Receipts under the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993.
  • 47. c) Pricing: The pricing of Global Depositary Receipt and Foreign Currency Convertible Bond issues should be made at a price not less than the higher of the following two averages:  (i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date; (ii)  The average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange during the two weeks preceding the relevant date. The "relevant date" means the date thirty days prior to the date on which the meeting of the general body of shareholders is held, in terms of section 81 (IA) of the Companies Act, 1956, to consider the proposed issue.
  • 48. Eligibility… B. For unlisted companies        Unlisted companies, which have not yet accessed the Global Depositary Receipt / Foreign Currency Convertible Bond route for raising capital in the international market would require prior or simultaneous listing in the domestic market, while seeking to issue Foreign Currency Convertible Bonds and through Global Depositary Receipts under the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993.           It is clarified that unlisted companies, which have already issued Foreign Currency Convertible Bonds in the international market, would now require to list in the domestic market on making profit beginning financial year 2005-06 or within three years of such issue of Foreign Currency Convertible Bonds, whichever is earlier.
  • 50. RBI Guidelines… FCCB can be raised under Automatic route . Minimum Average Maturity of FCCB shall be 3 years for borrowing up to US$ 20 million and 5 years in case it exceeds US$ 20 Million. Prepayment of FCCB is permitted upto US$ 200 Million subject to compliance of minimum average maturity period . For higher prepayment amount, RBI approval is needed. No Guarantee, Letter of Comfort, letter of Undertaking can be issued by Banks, FIIs or NBFC relating to FCCB .
  • 51. Role of SEBI… An application for listing of the Bonds has to be made to the stock exchange of the country where the FCCBs are to be issued and traded . Approval has to be obtained from the Indian Stock exchange to list the shares issued upon conversion of bonds, when the bondholder exercises the convertibility option. Filing the Offer Documents with SEBI , RBI and stock exchanges prior to FCCB issue.
  • 52. Company Law Requirements… FCCBs are bonds issued by an Indian company expressed in foreign currency to non-resident investors, which fall under Debentures . Prior intimation Notice should be given to listed Stock exchange, at least 7 days before the date of Board meeting in which the FCCB is to decided. Issuing Power of FCCBs is with the Board of Directors of the issuer Company . Convening a General Shareholders Meeting for procuring the shareholders consent with regard to the enhancement of borrowing powers of the Board .
  • 54.
  • 55. Benefits to Investors… Guaranteed returns on the bond in the form of coupon rates . Ability to take advantage of the price appreciation in the stock by means of warrants attached to the bonds, which are activated when the price of the stock reaches a certain point. Substantial yield-to-maturity (YTM) is guaranteed at maturity. Lower tax liability as compared to pure debt instruments due to the lower coupon rates.
  • 56. Overseas Stock Markets… Choice of stock exchange depends upon: New York Stock Exchange (NYSE) NYSE has 11 Indian companies listed on NYSE. Positive: IFRS accounting norms permitted Negative:SOX compliance is very costly. Only very large companies therefore list on NYSE Depth of the Market Availability of Funds Regulatory Requirements
  • 57. Overseas Stock Markets NASDAQ Listing is expensive 3 Indian companies listed London Stock Exchange (LSE) (Main Market) Caters to large companies Has been a favorite with large Indian companies Regulatory requirements are stringent Alternative Investment Market (AIM) Constituted in 1995, London’s AIM has been very successful in attracting overseas companies/funds lower entry barriers a lighter touch on regulation and compliance comparative flexibility
  • 58. Overseas Stock Markets Luxembourg Stock Exchange (LuxSE) Traditional favourite Listing is expeditious Cost of raising funds at Luxembourg is lower, compared to NYSE or NASDAQ Compliance requirements are less stringent Singapore Stock Exchange (SGX) Listing is less expensive Has large appetite for certain sectors such as shipping Regional hub Hong Kong Stock Exchange (HKEx) Offers world-class listing platform Costs of listing and compliance are competitive
  • 59. Overseas Stock Markets Dubai International Financial Exchange (DIFX) Set up in September 2005 Fast attracting attention especially of SMEs Expeditious listing Closer home and good liquidity Tokyo Stock Exchange (TSE) Japan is keen to promote TSE and Japanese Depository Receipts (“JDRs”) and attract foreign companies Asia Pacific Technology Exchange (APTEX) New Australian stock exchange with a focus on technology Plans to become fully operational by second half of 2008
  • 60. Conclusion… Risks in foreign investments: Changes in currency exchange rates Dramatic changes in market value Political, economic and social events Lack of liquidity Less information Reliance on foreign legal remedies Different market operations

Editor's Notes

  1. IFRS: International Financial Reporting SystemSOX: Sarbanes Oxley Act-which targets to prevent misconduct and improve corporate governance practices