FOREIGN DEBT (BONDS)

• A bond issued by a foreign borrower in the currency of the country in

which it is sold. Examples include Yankee bonds (US dollar denominated
bond issued by a foreign borrower in the US), Samurai bonds (issued in
Japan and denominated in yen) and Bulldog bonds (issued in the UK in
sterling).

• A major advantage of this is increased foreign exposure without bearing

the risk of fluctuating exchange rates.

• A major disadvantage is lesser returns tend to accrue as compared to direct

investment in these companies.
 FOREIGN SHARES
• Foreign Issue of shares implies issuing shares of a company to the
residents of another company.
• Foreign Issue can be through the mechanics of depository receipts or
even cross listing.
• Cross listing of shares is when a firm lists its equity shares on one or
more foreign stock exchange in addition to its domestic exchange.
• ADRs, GDRs and the like are a mechanism to repackage a security
primarily listed on an Exchange to enable it to be purchased by an
investor outside of that market. This is a distinct instrument, as not all
the rights may come with the ADR (GDR,EDR,IDR, etc.)
 INDIAN DEPOSITORY RECEIPTS
• An IDR is a receipt, declaring ownership of shares of a foreign
company. These receipts can be listed in India and traded in rupees.

• An Indian investor pays in Indian rupees for the IDR whereas a

shareholder in the issuer's home country pays in home currency.

• According to SEBI guidelines, IDRs will be issued to Indian residents in

the same way as domestic shares are issued. The issuer company will
make a public offer in India, and residents can bid in exactly the same
format and method as they bid for Indian shares.
Foreign Direct Investment Policy…
• Foreign Direct Investment (‘FDI’) – cross border investment with an objective to
establish ‘lasting interest’

• Objective - to encourage FDI to promote industrial & socio-economic development;

supplement domestic capital/ technology

• Foreign investment in India is regulated by Government of India’s FDI policy. The FDI
guidelines administered by the Ministry of Commerce and Industry.

• Department of Industrial Policy & Promotion (‘DIPP’), Foreign Investment Promotion

Board (‘FIPB’) and Secretariat of Industrial Assistance (‘SIA’) regulate the FDI Policy

• GoI has set up the Foreign Investment Implementation Authority (FIIA) to facilitate quick
translation of Foreign Direct Investment (FDI) approvals into implementation, to provide
a one-window to foreign investors by helping them obtain necessary approvals, sort out
operational problems and meet with various Government agencies

• Administrative and compliance aspects of FDI monitored by RBI

• Since 1991, policy has been liberalized substantially

5 to facilitate foreign investment