RAISING OF FUNDS OVERSEAS (through ADR/ GDR and FCCB) BY: Mansi Saini Nupur Singh Preksha Gupta Rahul Kumar Sahil Bhatia Sajal Kapoor Saksham Yogendra Saloni Malhotra Under the Guidance of: Prof. Rajesh Mishra
SOURCES EURO ISSUE DEPOSITORY RECEIPTS AMERICAN DEPOSITORY RECEIPTS GLOBAL DEPOSITORY RECEIPTS FOREIGN CURRENCY CONVERTIBLE BONDS
• 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). DEPOSITORY RECEIPT
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
TYPES OF ADR SPONSORE D • 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
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 FRACTIO N
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
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
ADVANTAGES OF ADR/GDR • Helps to invest in foreign companies • Two way fungibility • More transparency and stability From INVESTOR S’ point of view • Broaden and diversify a company’s investor base • Enhance company’s visibility,
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- Fall '16
- Corporate Finance, American Depositary Receipt