4. FDI
Foreign direct investment is a direct investment into
a production or business in a country by an
individual company or company of another
country, either by buying a company shares ,by
buying a company or by expanding operations in an
existing business in that country.
5. METHODS OF FDI
Foreign direct investor may acquire
voting power of an enterprise in an
economy through any of the following
methods.
By incorporating a wholly owned
company anywhere.
By acquiring shares of an associated
company
Participating in equity joint venture.
6. DEPOSITORY RECEIPT
o A depository receipt is a type of negotiable
(transferable) financial security that is a traded
on a local stock exchange but represents a
security ,usually in the form of equity. The DR ,
which is a physical certificate allows investors
to hold equity of other countries. One of the
common DR is the ADR American depositary
receipt. It has spread on other part of the globe
as a global depositary receipt.
7. No prior approval of SEBI, RBI or government is
required for issue of DRs
Depositary Receipts can trade on all U.S. stock
exchanges as well as on many European stock
exchanges
8. TYPES OF DEPOSITORY
RECEIPTS
ADRs – Traded in US markets
GDR s – Typically traded in one or more markets
EDR s – Traded in Euro markets
9. BENEFIT
Benefits to a Company:
Expanded market share through broadened and
more diversified investor exposure with potentially
greater liquidity, which may increase or stabilize the
share price.
Enhanced visibility and image for the company's
products, services and financial instruments in a
marketplace outside its home country.
10. Flexible mechanism for raising capital
A vehicle or currency for mergers and acquisitions.
11. Benefits to an Investor:
Diversification of portfolio
Familiar trade, and settlement procedures.
Information easily available
12. RISK INVOLVED
Inflation Risks of the countries
Exchange Rate risks
Political risks
Finally Performance of the company
13. AMERICAN DEPOSITARY RECEIPTS
Certificates issued by a U.S. depositary
bank, representing foreign shares held by the
bank, usually by a branch or correspondent in the
country of issue.
14. ADVANTAGES
oFlexibility to list on national exchange in the US
o Ability to raise capital
o Diversify portfolio
o Save money by reducing administration costs
o Trade is clear and settle in US Dollar
15. DISADVANTAGES
Only small selection of ADRs available for trading
Long time to receive information
Currency exchange risk
Political and economical risks
16. GDR
A bank certificate issued in more than one country
for shares in a foreign company
The shares are held by a foreign branch of an
international bank
17. ADVANTAGES
GDR allow the investors to hold share in foreign
companies without bothering about their accounting
practice, laws or any other rules
It facilitates easy trading method since in the global
market you can buy shares or sell it using dollars and
the stock market offerings are listed out in English
you can buy them even you are restricted by any
investment objective which prevents you from buying
stocks of foreign companies.
18. FOREIGN CURRENCY LOANS
Foreign currency loans are given by the domestic
banks to Corporate.
These loans are given from the deposits of the
Foreign currency accounts Non Resident Indians.
19. FCL-ADVANTAGES
These funds are primarily available to
Export oriented unit( project financing)
Importing companies( payments)
Public sector units ( For purchase of
capital goods
Relatively cheaper Funds
Lesser Processing time
20. EXTERNAL COMMERCIAL
BORROWINGS ECBS
These includes buyers credits, bank
loans, securities issued, credits from official credit
agencies.
These funds are made available by foreign
banks, Financial institutions abroad like IMF, World
Bank etc.
23. FOREIGN CURRENCY CONVERTIBLE BOND
(FCCB)
A convertible bond issued in a currency different
than the issuer’s domestic currency
It is a hybrid between bond and stock.
24. HOW DOES IT HELP?
It may appear to be more stable than their domestic
currency
Gives issuers the ability to access investment
capital available in foreign markets
It is a low cost debt as the interest rates given to
FCC Bonds are normally 30-50 percent lower than
the market rate because of its equity component
25. HOW DOES IT BENEFIT AN INVESTOR?
Safety of guaranteed payments on the bond
Redeemable at maturity if not converted
Easily marketable as investors enjoys option of
conversion in to equity
