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Sources of raising funds in international markets

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Sources of raising funds in international markets

  1. 1. SOURCES OF RAISING FUNDS IN INTERNATIONAL MARKETS By: MEGHA KUSHWAHA
  2. 2. SOURCES EURO ISSUE DEPOSITORY RECEIPTS AMERICAN DEPOSITORY RECEIPTS GLOBAL DEPOSITORY RECEIPTS FOREIGN CURRENCY CONVERTIBLE BONDS
  3. 3. DEPOSITORY RECEIPT • It is a negotiable financial instrument issued by a bank to represent a foreign company's publicly traded securities. • Through it, companies in India tap the global equity market to raise foreign currency funds by way of equity • When the depository bank is in the U.S., the instruments are known as American Depository Receipts (ADRs). European banks issue European depository receipts(EDRs), and other banks issue global depository receipts (GDRs).
  4. 4. AMERICAN DEPOSITORY RECEIPT (ADR) • It is a negotiable security representing securities of a non- US company trading in the US financial markets • It is denominated in US dollars and may be traded like regular shares of stock • Securities of a foreign company that are represented by an ADR are called American depository Shares(ADSs) • INFOSYS Technologies Ltd was the first Indian company to issue ADRs
  5. 5. TYPES OF ADR SPONSORED • Issued with cooperation of company whose stock will underlie the ADR • Listing on international Stock Exchange is allowed UNSPONSORED • Issued by broker, dealer or depository bank without the involvement of company whose stock underlie ADR • Trade in OTC market
  6. 6. ADR RATIOS • 1 ADR = 1 SHARE • ADR Ratio = 1:1 SINGLE • 1 ADR = 5 SHARES • ADR Ratio = 1:5 MULTIPLE • 1 ADR = ½ SHARE • ADR Ratio = 2:1 FRACTION
  7. 7. LIST OF ADRs ISSUED BY INDIAN COMPANIES
  8. 8. GLOBAL DEPOSITORY RECEIPT (GDR) • It is issued by one country’s bank as negotiable certificate and is traded on the stock exchange of another country against a certain number of shares held in its custody • It is denominated in some freely convertible currency • GDRs are often listed in Luxembourg, London, Frankfurt, Singapore and Dubai Stock Exchange • Reliance Industries was the first Indian company to issue GDRs
  9. 9. LIST OF GDRs ISSUED BY INDIAN COMPANIES
  10. 10. ISSUE MECHANISM OF ADR/GDR ISSUING COMPANY (DR. REDDY) DOMESTIC CUSTODIAN BANK (SBI) OVERSEAS DEPOSITORY BANK (MORGAN STANLEY) OVERSEAS STOCK EXCHANGE (NYSE) OVERSEAS INVESTOR CLEARING HOUSE (DTC,EURO CLEAR) UNDERLYING SHARES ISSUE OF DR DIVIDEND PAYEMENT
  11. 11. ADVANTAGES OF ADR/GDR
  12. 12. FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB) • They are debt instruments issued in a currency different than the issuer’s domestic currency with an option to convert them in common shares of the issuer company • The interest on FCCBs is generally 30% -40% less than on normal debt paper or foreign currency loans • Maturity period of FCCB is 5 years but there is no restriction on time period for converting FCCB into shares
  13. 13. ADVANTAGES OF FCCB
  14. 14. PROBLEMS ASSOCIATED WITH RAISING OF FUNDS IN INTERNATIONAL MAKETS
  15. 15. INDIAN DEPOSITORY RECEIPT (IDR) • It is issued and traded in a similar manner as that ADR and GDR • A foreign company lists its shares in Indian domestic market in INR terms while the underlying shares are listed and traded in any foreign exchange • Till date only Standard Chartered Bank has issued IDRs. 10 IDRs represent one share of Standard Chartered PLC’s share listed in London Stock Exchange.
  16. 16. THANK YOU

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