Understand the International Finance

1. International Finance
Conducted by
Mr. Sushil B. Bansode

2. International Finance
• International finance is the study of monetary interactions that
transpire between two or more countries.
• International finance focuses on areas such as foreign direct
investment and currency exchange rates.
• Increased globalization has magnified the importance of
international finance.
• An initiative known as the Bretton Woods system emerged
from a 1944 conference attended by 40 nations and aims to
standardize international monetary exchanges and policies in a
broader effort to nurture post World War II economic stability.

3. Foreign Institutional Investors (FIIs)
• A foreign institutional investor is an investor in a
financial market outside its official home country.
• Foreign institutional investors can include pension
funds, investment banks, hedge funds, and mutual
funds.
• Some countries place restrictions on the size of
investments by foreign investors.

4. Foreign Direct Investment (FDI)
• Foreign direct investments (FDI) are investments made by
one company into another located in another country.
• FDIs are actively utilized in open markets rather than closed
markets for investors.
• Horizontal, vertical, and conglomerate are types of FDI’s.
Horizontal is establishing the same type of business in
another country, while vertical is related but different, and
conglomerate is an unrelated business venture.
• The Bureau of Economic Analysis continuously tracks FDIs
into the U.S.
• Apple’s investment in China is an example of an FDI.

5. Instruments of International
Finance
• American Depository Receipts (ADR)
• Global Depository Receipts (GDR)
• Indian Depository Receipts (IDR)
• Foreign Currency Convertible Bonds (FCCB)
• Euro-Convertible Bonds (ECB)

6. American Depository Receipts
(ADR)
• An American depositary receipt (ADR) is a certificate
issued by a U.S. bank that represents shares in foreign
stock.
• ADRs trade on American stock exchanges.
• ADRs and their dividends are priced in U.S. dollars.
• ADRs represent an easy, liquid way for U.S. investors
to own foreign stocks.

7. Global Depository Receipts
(GDR)
• A global depositary receipt (GDR) is a bank certificate
issued in more than one country for shares in a foreign
company.
• A global depositary receipt (GDR) is very similar to
an American depositary receipt (ADR).
• Each GDR represents a particular number of shares in a
specific company.
• A single GDR can represent anywhere from a fraction
of a share to multiple shares, depending on its design.

8. Indian Depository Receipts
(IDR)
• Indian Depository Receipt (IDR) is a financial
instrument denominated in Indian Rupees in the form of
a depository receipt.
• The IDR is a specific Indian version of the similar global
depository receipts.
• IDR's are based on the original American depositary
receipts that were first introduced in 1927 in the US.
• The regulations relating to the issue of IDRs is contained
in Securities and Exchange Board of India (Issue of capital
and disclosure requirements) Regulations, 2009, as revised
from time to time.

9. Foreign Currency Convertible
Bonds (FCCB)
• A foreign currency convertible bond (FCCB) is a type of
convertible bond issued in a currency different than the
issuer's domestic currency.
• An FCCB investor can purchase these bonds at a stock
exchange, and has the option to convert the bond into equity
or a depositary receipt after a certain period of time.
• FCCBs are generally issued by companies in the currency
of those countries where interest rates are usually lower
than the home country or foreign country economy is more
stable than the home country economy.

10. Euro-Convertible Bonds
(ECB)
Euro Convertible Bond is a quasi equity issue,
outside the domestic market, which provides the holder
with an option to convert from a debt instrument
(investment) into an equity investment i.e., to a certain
number of equity shares at a predetermined price.

11. Thank You