Overseas sources of finance for Indian corporate

1. Overseas Sources
of finance for
Indian corporate

2. Introduction
• Before listing the instrument used by the Indian
corporate to attract overseas finance it is important to
get a glimpse of the institution from where these
instrument are issued. An International financial
market is a place where financial wealth is traded
between countries.
• Equity financing is a method of raising fresh capital for
the organisation by issuing the shares of the company
into the market. It is usually issued to the public,
institutional investors, or financial institution

3. Equity – ADR, GDR
• Shares of foreign stocks offered in foreign markets are
comprehensively known as depositary receipts.
• ADRs and GDRs are two types of depositary receipts with other
types including European depositary receipts (EDRs),
Luxembourg depositary receipt (LDRs), and Indian depository
receipts (IDRs).
• ADRs are shares of a single foreign company issued in the U.S.
• GDRs are shares of a single foreign company issued in more
than one country as part of a GDR program.
• Companies can issue depositary receipts in individual countries
or they may choose to issue their shares in multiple foreign
markets at once through a GDR.

4. Debt - FX denominated bonds like Yankee,
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.

5. Debt - INR denominated bonds like
Masala Bonds
• They are rupee-denominated bonds i.e the funds would be raised
from overseas market in Indian rupees.
• According to RBI, any corporate, body corporate and Indian bank is
eligible to issue Rupee denominated bonds overseas.
• While companies can raise funds through these bonds, there are
limitations for the use of such proceeds.
• RBI mandates that the money raised through such bonds cannot be
used for real estate activities other than for development of
integrated township or affordable housing projects.
• It also can’t be used for investing in capital markets, purchase of
land and on-lending to other entities for such activities as stated
above.

6. Foreign Currency loans - External
Commercial Borrowing.
• ECBs has made it easy for the Indian eligible entities to access
foreign capital and meet its needs. ECBs are in simple words
commercial loans taken for a commercial purpose in form of
bank loans, suppliers' credit, buyers' credit or securitized
instruments, sought from foreign lenders. The ECBs can be
obtained through automatic route or approval route or by
combination of both the routes. Monitored by RBI, ECB is a
facility made available to Indian eligible entities to be able to
seek huge investment from outside India and allow for foreign
capital flow in India.

7. conclusion
• Setting up a subsidiary of an Indian company in a capital-rich
country is another means of securing low cost finance. Many
schemes and growth opportunities are available by this method
for reputable companies in India, through their overseas
subsidiaries. With the Indian government accepting that foreign-
capital markets are a valuable source of funding, it is a good
time for businesses to access such markets and partners to
build up capital reserves over the coming decade.