I have been working on some of my college assignments, and I made this fine report on "Overseas sources of funds for Indian Corporates, and why Corporates lusts for those sources". Please read, review, and give your feedback.

1. Overseas Sources of Finance
for
Indian Corporates
Made By:
Abdul Basit Momin
MBA IB
Amity Business School, Mumbai

2. INDEX
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INTRODUCTION – INTERNATIONAL SOURCES OF
FINANCE
DIFFERENT SOURCES
FACTORS TO CONSIDER FOR OPTIMAL OVERSEAS
FINANCING
CONCLUSION - REASONS FOR CORPORATE’S LUSTS
FOR OVERSEAS FINANCE.

3. International Financing is also known as International Macroeconomics as it deals with finance on a global
level. There are various sources for organizations to raise funds. To raise funds internationally is one of them. With
economies and the operations of the business organizations going global, Indian companies have an access to funds in
the global capital market. International finance helps organizations engage in cross-border transactions with foreign
business partners, such as customers, investors, suppliers and lenders.
INTRODUCTION
INTERNATIONAL SOURCES OF FINANCE
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4. FACTORS TO CONSIDER FOR
OPTIMAL OVERSEAS FINANCING
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33.3
%
CROSS BORDER
ACQUISITION
33.3
%
UNDERTAKING NEW
PROJECTS
33.3
%
FUNDING FOREIGN JOINT
VENTURES SUBSIDIARIES
• TAXATION
• DEBT-EQUITY RATIO
• FUNDING STABILITY
• FUNDING DIVERSIFACTION
• CURRENCY
• INTEREST RATE
• MATURITY
• RELATED COSTS
• REGULATION
• NEGOTIATION
• CAPITAL MARKETS
DEVELOPMENT

5.  American Depository Receipts (ADR’s)
This a tool often used for international financing. As the name suggests, depository receipts issued by a company in
the USA are known as American Depository Receipts. ADRs can be bought and sold in American markets like regular stocks.
It is similar to a GDR except that it can be issued only to American citizens and can be listed and traded on a stock
exchange of the United States of America.
American Depository Receipts are a way of trading non-U.S. stocks on the U.S. exchange. Through ADRs, Indian
companies who are willing to raise funds from the U.S. can do so by issuing shares on American Stock exchange. However,
the issuance of ADR is governed by the rules and regulations as laid down by the regulator SEC. The Indian Companies will
have to maintain accounts as per the American Standards.
The Indian companies cannot directly list their equity shares on the international stock exchange. So in order to
overcome this problem; the companies give shares to an American bank. These American banks in return for those shares
provide receipts to the Indian companies. The companies raise funds by providing those ADR receipts in American share
market.
DIFFERENT SOURCES
EQUITY
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6.  Global Depository Receipts (GDR’s)
In the Indian context, a GDR is an instrument issued abroad by an Indian company to raise funds in some foreign
currency and is listed and traded on a foreign stock exchange. A holder of GDR can at any time convert it into the number of
shares it represents. The holders of GDRs do not carry any voting rights but only dividends and capital appreciation. Many
renowned Indian companies such as Infosys, Reliance, Wipro, and ICICI have raised money through issue of GDRs.
GDRs are similar to ADRs except the fact that it is listed on an exchange outside the U.S. and helps the issuer to
raise funds simultaneously in different markets i.e. it allows the foreign firms to trade on the exchange outside its home
country.
DIFFERENT SOURCES
EQUITY
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7. ADR and GDR
RISE AND FALL
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Many Indian corporates, too, have followed this route of tapping the global market via global depository receipts (GDRs) and
American depository receipts (ADRs), since 1993. Issuing of ADRs by companies such as Infosys in NASDAQ or VSNL in
the New York Stock Exchange (NYSE) in and around 1999 or 2000 had attracted widespread attention.
Of course, not all the DRs were floated in NASDAQ or NYSE. In fact, given the stringent listing in the American stock
exchange, in terms of both number and amount issued, the Luxembourg stock exchange emerged as the most preferred
destination for DRs issued by Indian corporates.
While the DRs seem to have played a definitive role with regard to accentuating integration of the Indian financial markets
with global counterparts, they appear to now be past their prime.
While international investors continue to look for global avenues for portfolio diversification something that the DRs issued by
Indian companies tapped into during the period preceding the global financial crisis the Indian corporations’ appetite for DR
issuances seems to have ebbed in more recent years. So much so, that no new ADRs or GDRs were issued by Indian
companies in 2016-17 and 2017-18.
Then, in 2018-19, ADR/GDR issuances rose to the tune of $1.8 billion. What explains this sudden increase?
As per data revealed by the Bank of New York Mellon global DR directory, while no GDR/ADR has been issued by an Indian
company in any of the stock exchanges across the world in 2019, only three DRs have been issued in 2018. These pertained to
GDRs issued by DishTV and Tube Investments at the London Stock Exchange. Further, the 2018 GDR issues were outcome of
corporate restructuring activities of these firms.

8. ADR and GDR
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On 2-1-2019, SEBI banned Sanraa Media companies for manipulating share prices using GDRs. In 2017, SEBI barred 19 domestic
and foreign firms from securities markets in India for manipulation in issuances of GDR and warned several others including foreign
institutional investors (FIIs). SEBI imposed a ten year ban on K Sera Sera Ltd. and Asahi Infrastructure and Projects Ltd., which
figured among the six companies whose GDR issuances were manipulated to gain undue advantage, while at least 26 entities
including European American Investment Bank AG (Euram) have been warned that all their future dealings in Indian markets should
be strictly as per regulations.
SEBI has also widened its probe into suspected misuse of GDRs for routing black money back to India and is investigating the role of
over 50 individuals and companies. SEBI in its initial investigation has found large scale misuse of GDRs for suspected illicit funds
stashed abroad to bring back to India. Rounding tripping of funds has been a major route for laundering black money.
As per Credit Rating Information Services of India Limited (Crisil) data, of the 40 global GDRs issued by Indian companies in 2010,
investors have lost money in 85% of the issues, with four out of five issues giving a negative return of 35% or more. The number of
GDRs slowed in 2011 and only 12 Indian companies raised Rs 940 crores ($0.2 billion) through GDRs as compared to 34 companies
that raised Rs 4510 crores ($1.0 billion) during the corresponding period in 2010. In 2012-2013, not a single Indian company opted for
equity offerings; on the other hand, 29 firms raised Rs 60,534 crores by selling bonds overseas.
Although IDRs were first introduced in 2000, the Indian securities market saw its first IDR issue from Standard Chartered in May
2010. This IDR was listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
The reason for the lack of interest in the IDR market includes (a) lack of fungibility; (b) stringent eligibility criteria; (c) lack of clarity
on the issue of taxation; (d) lack of advertising; and (e) concern over the stipulation of allocating 50% of an IDR issue to retail
investors.
SEBI’s ongoing investigations with allegations of GDR misuse have deterred companies from adopting GDR route which might
seemed to have plagued with various abnormalities in the market. IDR is not the most favored route for foreign companies as till date
only one company has issued it thus creating an urge for need of a better alternative in the market.

9. ADR and GDR
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10.  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.
Around 6 companies have issued Yankee bonds. Reliance Industries Ltd. (RIL) was the first company to issue a Yankee bond
in 1996. Yankee Bond issue in 1997 made news by being the first company from India with successful flotation of $100
million 100-year Yankee bond followed by a second issue of $214 million for a period of 30 years. Issuance of 100year
Yankee Bond created ripple in Indian economy. The Yankee bonds are due for redemption on 6 Aug 2046 and have call
options for 30 years due on 6 Aug 2026. The coupon rate has been fixed at 10.5%. Lead manager of the US$100m issue is
Merrill Lynch. Proceeds of the bond issue will be used for the import of capital equipment by Reliance.
DIFFERENT SOURCES
DEBT - FX
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11. YANKEE BONDS
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12. YANKEE BONDS
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Yankee Bonds Activity Trend

13.  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.
Required Standards:
The eligibility criteria for issuing Samurai bonds were not loosened until April 1985.When examining applications from
potential samurai issuers, the Ministry of Finance considered the tendency of the Japanese capital account balance and the
liquidity in the country’s economy. For the actual issuance of Samurai bonds, the Japanese Ministry of Finance set a quota per
quarter year, and employed a queue system. Borrowers, if they agreed upon the terms of underwriting, entered the quota by
rotation from the top of the queue. In 1998, the Ministry of Finance’s close regulatory control was annulled.
DIFFERENT SOURCES
DEBT - FX
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14. SAMURAI BONDS
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15. SAMURAI BONDS
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16.  Masala Bonds
Masala Bonds are rupee denominated borrowings issued by Indian entities in overseas markets. Masala means spices
and the term was used by International Finance Corporation (IFC) to popularize the culture and cuisine of India on foreign
platforms. Masala Bonds were introduced in 2014. The IFC issued the first masala bonds in India to fund infrastructure
projects. Indian entities or companies issue masala bonds outside India to raise money. These bonds are issued in Indian
currency rather than local currency. If the rupee falls, the investor will be bearing the losses.
Some of the prohibited use of Masala Bonds are:
❖ Real estate activities other than development of housing projects.
❖ Investing in capital market.
❖ Activities prohibited as per the Foreign Direct Investment (FDI) guidelines.
❖ Purchase of land.
Who can invest in Masala Bonds?
Foreign investors who want to take exposure to Indian assets and are constrained from doing it directly in the Indian market or
prefer to do so from their offshore locations can invest in Masala bonds. HDFC, NTPC and India bulls Housing are among
Indian corporates which have raised funds via this option. The subscriber of these bonds can sell rupee bonds to a third party
but the proceeds from the issue can’t be used for real estate activities or capital market investment. However, the proceeds
from these bonds can be utilized for development of integrated township/affordable housing project or any other
infrastructural development project.
DIFFERENT SOURCES
DEBT - INX
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17. MASALA BONDS
TRENDS AND OUTLOOK
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Masala Bonds have been adopted by a variety of issuers. The types of issuers who have accessed funding via Masala
Bonds from the international debt capital markets include corporates, quasi-sovereign entities such as the National Highways
Authority of India and state level entities such as the Kerala Infrastructure Investment Fund Board. Factors such as a shortfall
in supply of credit onshore and a trend towards diversification of funding sources by borrowers in India are expected to
encourage more issuers to access the international fixed income markets in this manner. Issuances would also be encouraged
by increased investor appetite for better yields from the emerging markets. At the time of writing this article, more than 50
issuances of Masala Bonds have taken place raising more than USD5 billion1 (INR equivalent) from the international debt
capital markets.
With the Government of India acting to ease the liquidity shortage in India, it is expected that the requirements for
ECBs would be further liberalized. It is expected that Masala Bonds will remain attractive for investors seeking an opportunity
to participate in one of the fastest growing economies.

18. External Commercial Borrowings (ECB) refers to the debt shouldered by an eligible entity in India for solely
commercial purposes, that has been extended by external sources, i.e. from any recognized entity outside India. These
borrowings are expected to conform to norms and conditions put forth by the RBI.
ECBs have proven to be instruments that greatly aid Indian firms and organizations in their efforts to raise funds
from beyond India's borders, especially with regard to bringing in fresh investments. One might recognize that structures
similar to ECBs include those of Foreign Currency Convertible Bonds (FCCBs) and Foreign Currency Exchangeable Bonds
(FCEBs). It is vital to note that while the main purpose underlying the issuance of FCCBs is the raising of capital, ECBs are
more expansively applicable; within the latter's ambit lies commercial loans that can include securitized instruments, bank
loans, suppliers' credit, buyers' credit, and bonds. The minimum maturity period of the aforementioned instruments is, on
average, three years
DIFFERENT SOURCES
EXTERNAL COMMERCIAL BORROWINGS
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19. ECBs
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20. Indian companies need money and they
are exploring every avenue at home and
abroad to find it. In addition to it Indian
government has eased its policy on
external borrowings. Therefore for the
past few years raising funds overseas has
become increasingly attractive because of
the lower cost, greater flexibility, speed
and depth that international financial
markets offer.
CONCLUSION
• LOW INTEREST RATES
• IPO’S HAVE TURNED TOO RISKY
• DIVERSIFICATION OF DEBT INSTRUMENTS
• SURGING OVERSEAS EQUITY ISSUES
• BUOYANT DEMAND
• REGULATORY LOOSENING
• INNOVATIVE INSTRUMENTS
• EXCHANGE-RATE RISK TOLERANCE
• THE SEARCH FOR ALPHA
• PERSISTING CONSTRAINTS
• FUTURE TRENDS
REASONS FOR CORPORATE’S LUSTS
FOR
OVERSEAS FINANCE

21. THANK
YOU

22. Your Logo Here
22
• https://www.fdi.finance/blog/how-to-borrow-money-from-abroad/
• https://www.thehindubusinessline.com/opinion/how-to-revive-depository-receipts-
market/article30744488.ece#
• https://www.scconline.com/blog/post/2019/08/12/direct-listing-the-beginning-of-demise-of-gdr-and-idr-
routes/
• https://www.investopedia.com/terms/y/yankeebond.asp
• https://commerceatease.com/international-financing/
• https://economictimes.indiatimes.com/indian-companies-raising-finance-from-
abroad/articleshow/3603463.cms
• https://www.afponline.org/ideas-inspiration/topics/articles/Details/11-factors-to-consider-for-optimal-
overseas-financing/
REFERENCES