The document discusses various ways that companies can raise equity capital internationally, including listing shares on foreign stock exchanges, issuing depository receipts, and listing Indian Depository Receipts (IDRs) on Indian exchanges. It provides details on major stock exchanges worldwide, cross-listing of shares, American Depository Receipts (ADRs), Global Depository Receipts (GDRs), their uses and benefits, and gives examples of companies that have issued ADRs and GDRs. It also covers the first company to issue IDRs in India.

1. The International
Banking
& Money Market
PART II

2. The International
Euro-Equity Market

3. Mobilizing Equity Flows
For mobilising equity investments, the companies
can approach:
1. Domestic markets
2. Foreign stock exchanges

4. MAJOR STOCK EXCHANGES ( 31.12.2010)
Rank Economy Stock Exchange Location
Market
Capitalisation Trade Value
(USD Billions)
(USD
Billions)
1 USA/ Europe NYSE Euronext New York 15970 19813
2 USA/ Europe NASDAQ OMX New York 4931 13439
3 Japan Tokyo Stock Exchange Tokyo 3,827 3,787
4
United
Kingdom London Stock Exchange London 3,613 2,741
5 China Shanghai Stock Exchange Shanghai 2,717 4,496
6 Hong Kong Hong Kong Stock Exchange Hong Kong 2,711 1,496
7 Canada Toronto Stock Exchange Toronto 2,170 1,368
8 India Bombay Stock Exchange Mumbai 1,631 258
9 India
National Stock Exchange of
India Mumbai 1,596 801
10 Brazil BM&F Bovespa Sao Paulo 1,545 868
11 Australia
Australian Securities
Exchange Sydney 1,454 1,062
12 Germany Deutsche Borse Frankfurt 1,429 1,628
13 China Shenzen Stock Exchange Shenzen 1,311 3,572
14 Switzerland SIX Swiss Exchange Zurich 1,229 788
15 Spain BME Spanish Exchanges Madrid 1,171 1,360
16 South Korea Korea Exchange Seoul 1,091 1,607
17 Russia MICEX Moscow 949 408
18 South Africa JSE Limited Johannesburg 925 340

5. Mobilizing Equity Flows – Cross
Listing
Cross-listing refers to a firm having its equity
shares listed on one or more foreign
exchanges, in addition to the home country
stock exchange
MNCs often cross-list their shares, but non-
MNCs also cross-list

6. Foreign Investors
 Foreign investors enter an equity market with
basic risk return trade off in their minds
 While entering a nation, the FIIs undertake a
country study in which various economic
indicators are tracked and analysed…..

7. Foreign Investors
1. The growth rate of the economy
2. Debt/ GDP ratio
3. Foreign reserve position
4. Debt service ratio
5. Transparency of institutional practices
6. Political risk

8. Mobilizing Equity Flows
 In developed equity markets, accounting
standards and disclosure norms are stringent
 Therefore, it is usually difficult to list equity
on these exchanges
 To avoid this, depository receipts can be
issued and funds mobilised

9. ADRs & GDRs
In American markets, there are two important
instruments with the help of which the funds can
be mobilised:
1. American Depository Receipts (ADRs)
2. Global Depository Receipts (GDRs)
ADRs have less stricter norms than GDRs

10. GDRs
 GDR represents a certain number of
underlying equity shares
( e.g. Reliance 1 GDR = 2 equity shares)
 The shares are issued by the company to the
intermediary called the depository, in whose
name the shares are registered
 It is the depository which subsequently issues
the GDRs

11. GDRs
 The physical possession of the equity shares
is
with custodian
 GDRs do not figure in the books of accounts of
the company
 Though the GDRs are quoted in dollars, the
underlying is in rupees

12. GDRs
 The dividend outflow is in rupees. The
depository converts it in US dollars and pays
to the investors after deducting tax
 GDRs can be cancelled and exchanged
against
share certificates

13. Uses of GDR for Corporate Financing
 To raise debt or equity capital
 To diversify shareholder base
 To increase demand for their securities
 To create dollar denominated securities for
tax efficient acquisitions
 To enhance global image
 The company does not assume any foreign
exchange risk

14. Benefits to the Investors
 GDRs are quoted in dollars, dividend and
interest are also in dollars
 GDRs overcome foreign investment
restrictions
 GDRs overcome obstacles that institutional
investors have in purchasing and holding
securities outside the domestic markets

15. GDRs
 Prices of GDRs are often close to values of
related shares, but they are traded & settled
independently of the underlying share
 Several international banks issue GDRs, such
as
JP Morgan Chase, Citigroup, Deutsche Bank,
Bank of New York

16. GDRs
 GDRs are often listed in the Luxembourg Stock
Exchange and in the London Stock Exchange,
where they are traded on the International
Order Book (IOB)
 Normally 1 GDR = 10 Shares, but not always

17. GDR Prices as on 03.09.2010
1 USD = Rs. 46.6700
Security Name
GDR
Price
Equiv
Value
Issue
Date
Issue
Size
Issue
Price
Prem /
Discount
(US $) (Rs.)
(USD
millions) (USD)
to Issue Price
(%)
L and T (GDR) 39.85 929.90 31/03/1996 150.00 15.35 159.60
M and M (GDR) 13.67 637.98 30/11/1993 74.75 4.46 206.50
Ranbaxy (GDR) 10.98 512.44 30/06/1994 100.00 19.38 -43.34
RIL (GDR) 40.00 933.40 28/02/1994 300.00 11.75 240.42
SBI (GDR) 118.63 2,768.23 31/10/1996 369.95 14.15 738.37

18. American Depositary Receipts (ADRs)
 ADR represents ownership in the shares of a
non-U.S. company and trades in U.S. financial
markets
 The stock of many non-US companies trade on
US stock exchanges through the use of ADRs

19. American Depositary Receipt (ADRs)
 ADRs enable U.S. investors to buy shares in
foreign companies without the hazards or
inconveniences of cross-border & cross-
currency transactions
 ADRs carry prices in US dollars, pay dividends
in US dollars, and can be traded like the shares
of US-based companies

20. ADR Prices as on 03.09.2010
1 USD = Rs. 46.6700
Security Name ADR Price (US $) ADR Price Date Equiv Value (Rs.)
Dr.Reddy (ADR) 30.56 3/9/2010 1,426.24
HDFCBank (ADR) 169.58 3/9/2010 7,914.30
ICICIBk. (ADR) 43.31 3/9/2010 2,021.28
INFY(ADR) 60.66 3/9/2010 2,831.00
MTNL(ADR) 2.74 3/9/2010 127.88
Patni (ADR) 19.60 3/9/2010 914.73
Rediff (ADR) 2.95 3/9/2010 137.68
Satyam (ADR) 5.04 3/9/2010 235.22
SIFY (ADR) 1.57 3/9/2010 73.27
Sterlite (ADR) 13.88 3/9/2010 647.78

21. Indian Equity & Foreign Equity Market
 In Sept. 1992, the Indian government
announced the opening of Indian stock
markets for approved foreign institutional
investors (FIIs)
 FIIs were allowed to buy 24% of equity in
Indian companies
 The eligible foreign investors include
pension funds, mutual funds etc.

22. Indian Depository Receipts (IDRs)
 A foreign company can access Indian securities
market for raising funds through issue of IDRs
 An IDR is an instrument denominated in Indian
Rupees in the form of a depository receipt
created by a Domestic Depository against the
underlying equity of issuing company

23. Indian Depository Receipts (IDRs)
Just like overseas investors in the US-listed
American Depository Receipts (ADRs) of
Infosys and Wipro get receipts against
ownership of shares held by an Indian
custodian, an IDR is proof of ownership of
foreign company’s shares
The IDRs are denominated in Indian currency

24. Indian Depository Receipts (IDRs)
 IDRs will be issued to Indian residents in the
same way as domestic shares are issued
 Investors eligible to participate in an IDR issue
are institutional investors, including FIIs — but
excluding insurance companies and venture
capital funds — retail investors and non-
Institutional Investors
 NRIs can also participate in the Issue

25. Indian Depository Receipts (IDRs)
Indian individual investors have restrictions on
holding shares in foreign companies, but IDR
gives Indian residents a chance to invest in a
listed foreign entity
No resident individual can hold more than
$200,000 worth of foreign securities, including
shares, as per foreign exchange regulations.
However, this will not be applicable for IDR

26. Indian Depository Receipts (IDRs)
Standard Chartered PLC, a UK based
multinational bank has become the first global
company to file for an issue of Indian
Depository Receipts in India
The company’s issue for 24 crore IDRs opened
on may 25, 2010 and sought to raise between
Rs. 2400 to Rs. 2700 Crore.
The issue was subscribed 2.20 times on an
overall basis

27. Indian Depository Receipts (IDRs)
10 IDRs represent one share of US $ 0.50
nominal value
Standard Chartered Bank, Mumbai is the
domestic depository, and it appointed Bank of
New York, Mellon as its overseas depository

28. Thank you