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Definition Global Depositary Receipt. A negotiable certificate held in the bank of one country representing a specific number of shares of a stock traded on an exchange of another country. American Depositary Receipts make it easier for individuals to invest in foreign companies, due to the widespread availability of price information, lower transaction costs, and timely dividend distributions. also called European Depositary Receipt.
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Depositary Receipts Integration of capital markets of the world began two decades ago and has accelerated dramatically over the past few years. Depositary Receipts are an important element in the process of market integration and have become very popular with issuers over the years. They permit investors to acquire and trade in foreign securities and give the issuing company access to major international markets. In the 1990's, the compounded annual growth rate of Depositary Receipt trading and dollar trading volume globally has been 30% and 22% respectively. In addition, an estimated 1.50 billion Depositary Receipt's valued at $20-25 billion are traded on an average in the Over-The-Counter Exchange and European markets every year. India's Depositary Receipt program India has the distinction of having the largest number of GDR issues (Rule 144A/Reg S) by any country. The first issue was by Reliance Industries ($ 150 mill) in May 1992. Since then, the depositary receipt concept developed considerably in India with a total of 60 Indian companies raising over US$ 6.5 billion.
etc. Press Trust of India (PTI) and DART. The Skindia GDR Index was first modified in April 1995. It also takes into account substitutions in the index set and important corporate actions such as stock splits without affecting the index value. Knight Ridder. Financial Express. It was not reviewed in the subsequent year as few companies had tapped the GDR market. The committee will review the index set every quarter and carry out any changes if needed. Indian Express. it is necessary to develop reliable market indicators which can be used as a tool by investors for measuring their portfolio returns vis-à-vis market returns. The base of the Skindia GDR Index is April 15. However. Business Standard. Observor. The Index. a market value weighted index (total number of GDRs issued multiplied by GDR price). CREATION OF SKINDIA GDR INDEX Index Committee To meet its objective of being a consistent barometer of the GDR market. Base period of the index The base date of Skindia GDR Index is Jan 02.Origins of the Skindia GDR Index Indian GDRs traded on international bourses are governed by parameters specific to the market in which they are traded. The new Skindia GDR index was constructed after carefully studying various other indices. In response to this need. To capture their movement and performance. Skindia Finance pioneered a GDR index which became popularly known as the 'Skindia GDR Index'. India Inc (New Jersey. . It also appears daily on the Bloomberg. making it necessary to construct an index which is in tune with these changes. Method of Index computation The methodology selected for the index computation is market capitalisation weighted as per international standards followed by S&P 500 and NSE 50. It is used as a standard at the Institute of International Finance (IIF) in Washington and is quoted in all the leading newspapers such as Times of India. Economic Times. consulting many experts in the field and our own in-house research. Skindia formed an internal index committee which was involved in construction of the index and is responsible for its daily maintenance. 1995 and the base value is set at 1000. US). economic reforms and liberalisation of the financial sector have brought momentous changes to the capital markets. making their prices unique. is one of the most popular GDR Indices worldwide. 1994 with the index set consisting of 22 actively traded GDRs.
As GDRs are bought and traded mostly by large funds abroad. as the case may be. . Also. a GDR index should reflect the transaction costs (execution cost + impact cost) faced by fund managers when they trade in them. which is lower. both of which require the entire index set to be treated and traded as a portfolio. The selection criteria of an index set should aim at fulfilling this objective. which is his cost of executing the transaction. a fund manager would suffer a loss. in which a fund manager buys and then sells the security at the next instant. the possibility of price impacts need to be considered. as funds trade in large sized orders. Other important indicators Skindia GDR Index Premium: The premium/discount % of the Skindia GDR Index is the difference in the cost of buying GDRs and the same number of underlying shares of companies in the Index. impact cost would be low as large orders can be executed without distorting the price too much. he would buy at the best ask price (e. If one assumes a round trip transaction. Skindia GDR Price/Earnings Ratio:It is the weighted average of the price/earnings ratio of stocks in the index set. which also adds to the fund managers transaction cost. more likely its purchase price will be higher. Skindia GDR Industry Indices: We have developed various industry indices which will enable fund managers to track the movement of specific industries and their performance with that of the Skindia GDR Index. all GDRs should fulfill the following criteria • The spreads¹ of the GDRs in the index should be less than or equal to an average 6.g.75). Larger the size of an order. For a security that enjoys sufficient liquidity. Price impacts arise due to the law of supply and demand.00% in the previous four quarters or since existence (if less than four quarters). SELECTING THE INDEX SET For an index to work as an investment benchmark. For inclusion in the index. This indicator helps investors in taking investment / trading decisions based on the price differential of the same stock in the two markets. it must provide an unbiased model of the market segment it is intended to represent. A security enjoying sufficient liquidity would have narrow spreads and thus lower execution cost. By doing this.Weightages Weightages of our index set are based on the total market capitalisation (domestic equity + GDR equity) of the company and not its GDR capitalisation alone. Reliance-$23. Execution costs arise due to spreads between the bid and offer.25) and sell at the best bid price (Reliance-$22. Modern applications: The index is well suited for modern applications such as index funds and index derivatives. The approach of quantifying liquidity using spreads between the bid and offer ensures that execution and impact costs are low for securities in the index set.
25% 48.28 964.620 3.38% 49.43 2.52% 0. i.26 1.432.37 23.35% 0.18 5. SECURITIES IN THE SKINDIA GDR INDEX Sr.33% 0.69% 0.84% 0.942 3.e.030 3. New issues will only be included in the index set if they fulfill the above criteria when the index comes up for its quarterly review.68 3.12 3.11 9.402.20% 0.608. ¹ The bid-ask spread of a security is defined as the percent spread between the best bid and ask over the midway quote.18% 37.17% 2.24 1.28% 20.15% 14.56% 29.57% 1.I.15% 55.34 20.51% 0.78% 0.953 3.00% or since existence (if less than four quarters).630. No.22% 0.24 3.30% 12.10% 1.607.890 3.856 4. as the case may be. Hotels 4 Finolex Cables 5 Grasim (1st) 6 Guj Ambuja 7 Hindalco (1st) 8 ICICI (ADR) 9 Indian Hotels 10 Infosys 11 IPCL 12 ITC 13 L & T (1st) 14 Mah & Mah 44.• • Those GDRs once included in the index set will be removed if the average spread in the previous four quarters is greater than 9.301.210.44% 2.78 3.738 2.39% 19.23% 36.24% 1.11% 5.51% 5.917. crores) 5.23% 1.58% 2.138 4.02% 0.639.92% 3.09% 0.97% 41.855 4.82% 21.179 3.811 2. best (bid + ask)/2.173.17% 0.883 2.788 1 Bajaj Auto 2 BSES Ltd 3 E.527.42% 1.785 3.72% 0.03 6.17% 3.626.111.82% 0.33% .40% 0.704 3.05% 59. Name of Company Market Weightage RBeta Volatility Capitalisation square factor on 30-Sep-99 (Rs.97% 3.
* Skindia GDR Index 21 Market Index 63 COMPARISON WITH BSE SENSEX & NIFTY ~ Number of securities % of BSE represented # Volatility R-square w.86% 1.484.083.39% *Market index is an index consisting of all the GDRs.38 13.32% 1.500.40% R-square w.071 3.66% 23.83% Nifty 50 40.31% 1.822 3.58% 1.04% 0.486.039 3.r.434.396.00% 1.20 6.34 6. COMPARISON WITH MARKET INDEX ~ Number of securities % of GDR Market 88.55% 42. 1997 Skindia GDR Index 20 22.19% 53. market index 70.r.79% 1.t.113 3.13% 5.71% 0. .47% 27.424.34% .733 2.67% 100. GDR index # As on June 30.27% 6.43% 7.908.186 3.34% 1.52% 31.076 5.30% 2.12% 0.34% 100% Represented Volatility 2.86% 4.15 MTNL 16 Pentafour Software 11.77% 0.90 2.17 11.00% 66.36% 17 Ranbaxy Labs 12.759 20 Telco (1st) 21 VSNL Total Market Cap.62% 48.12 9.55 18 Reliance 19 State Bank of India 22.42% 62.87% 0.t.57% 1.00 167.85% BSE Sensex 30 36.
. SKINDIA GDR INDEX PREMIUM INDUSTRY SEGREGATION .
12% 14.01% 10.470 3000 17 S.875 500 4 E.I.IMPACT COST OF INDEX FOR $ 0.44% 2.550 600 16 Reliance 1.13% 42.00 35.32% 33.74% 13.02% 3.I.87% 1.93% 3. Hotels 2.32% 53.52% 45.35% 0.86% 28.# Bombay Dye BSES Ltd Textiles Autos Autos Paper Textiles Power 9. ** The smallest market lot size for execution purposes is taken as 100 GDRs.000 1000 7 Hindalco 0.200 800 11 IPCL 2.86% 17.025 900 3 BSES Ltd 1.850 2700 India 19 Telco 2.46% 1.69% 1.21% 1.02% 7.13% 2.000 3300 18 State Bank of 1.77 9. 1.57% 1.50% 12.47% 9.78 12.41% 2.450 600 5 Grasim 2.86% 67.850 1400 14 Mah & Mah 1.00 137.59% 14.0 1.38% 2.350 600 9 Indian Rayon 3.0 GDR Issue Price **(US$) Arvind Mills Ashok Leyland Bajaj Auto Ballarpur Ind.54% 13.89 8.72% 1.77 110. Sr.13% 1.500 3500 20 VSNL 1.875 500 2 Bajaj Auto 1.00 1.19% 24.00 50.04% 2.5 MILL TRANSACTION Name of Impact Cost (%) Transaction Number of No Company Size * GDRs traded ** Buy Sell 1 Ashok Leyland 2.79 16.L.23% 1.57% 29.20 14.00 125.26% 2.23% 68.54% 1.A.40 .400 800 6 Guj Ambuja 2.90% 520.56% 10.850 1100 12 ITC 2.0 1.600 3200 13 L & T 2.0 1.56% 2.0 3.875 ~ * Impact cost has been calculated using quotes on 29-Jul-97.0 3.No.200 800 8 Indian Hotels 1.86% 0.170 600 10 ICICI 1. THE COMPREHENSIVE GDR LISTING GDR Companies # euro convertible bond **adjusted for bonus Industry Segregation Date Of GDR Issue 03-Feb94 20-Mar95 27-Oct94 27-May94 16-Nov93 04-Mar96 Size Shares Of GDR per Issue GDR US $ Mill 125.51% 3.55% 1.960 2400 Average 1.700 1200 15 Ranbaxy Labs 1.
0 1.16m 9.00 100.00 07-Jul-94 40. I.0 1.00 50.67 26.50 5.00 18-Jul-94 48.11 22. Hotels EID Parry Finolex Cab Flex Industries G.F.98 20.00 100.00 80.00 2.0 5.73 16.77 16. Shipping G.0 1.0 1. 95 Aluminium Aluminium Diversified Cement Aluminium Hotels 22-Jul-93 72.0 1.0 1.00 90.39 16.0 5.28 12.00 19-Jul-94 30-NovPackaging 95 17-FebShipping 94 06-OctFertiliser 94 04-NovOil & Refineries 99 04-MarTextiles 94 25-NovDiversified 92 09-JunDiversified 94 26-NovCement 93 02-AugTelecomm. Reddy's E.00 55.55 11.60 7.0 1.E.00 08-Jul-94 21-Sep94 11-Oct94 22-Feb94 28-Apr95 100.0 1.00 60.00 2.Century Textiles Diversified CESC Core Parent Crompton Greaves DCW Dr.05 15.00 70.0 6.0 1.0 5.0 1.00 30.60 8.23 6.00 07-Oct94 40.0 1.95 9.05 4.50 45.0 5.30 8.00 76.0 254.00 19-May94 25.0 1.60 02-Jul-96 50.0 1.75 9.67 12.0 2.C GAIL Garden Silk Grasim (1st) Grasim (2nd) Guj Ambuja # Himachal Futuri Hindalco (1st) Hindalco (2nd) Hindustan Dev.00 10.0 1.00 61.00 125.00 90.00 86.0 1. Indian Hotels Power Pharma Electrical Diversified Pharma Hotels Fertiliser Cables 21-Sep94 14-Apr94 21-Jun94 100. India Cements Indian Alum.25 .0 1.0 4.N.56 13.30 10.94 12.
0 0.0 10.0 2.00 135.50 9.36 12.0 1.00 150.38 10.0 1.75 19.0 1.01 4.18 21.96 1.0 1.13 16.35 4.00 13-Oct93 68.0 1.0 15.0 15.00 150.Indian Rayon Indo Gulf Indo Rama ICICI ICICI (ADR) Infosys IPCL ITC J. Corp Jain Irrig JCT Ltd.0 Raymond Woolen Textile Reliance Reliance (2nd) Reliance Petroleum Diversified Diversified Diversified .958 3.53 47.0 10.0 10.70 15.00 18-Jan94 100. Kesoram Ind L & T (1st) L & T (2nd) Mah & Mah MTNL NEPC Micon Nippon Denro# Oriental Hotels Ranbaxy Labs Diversified Fertiliser Textiles Finance Finance IT Petrochemicals Cigarettes Diversified Plastics Textiles Diversified Diversified Diversified Autos Telecom Diversified Steel Hotels Pharma 25-Jan94 125.00 02-Aug96 230.50 23.0 1.80 34 13.00 100 1.0 1.0 2.00 11.75 418.0 5.38 08-Dec94 85.85 17-Oct94 55.00 25-Feb94 30.0 2.00 60.0 2.00 29-Jul-94 31-Jul96V 18-Nov94 01-Mar96 30-Nov93 04-Dec97 07-Nov94 03-Mar94 14-Dec94 29-Jun94 09-Nov94 27-May92 15-Feb94 18-Oct99 45.00 74.0 2.70 125.51 11.0 1.35 23.46 11.37 11.00 100.5 3.00 21-Mar96 50.00 30.00 22-Sep99 315 11-Mar99 70.61 16.60 16.65 8.00 300.5 1.K.00 30.0 5.87 7.0 2.
00 50. The write-up gives an overview of the various factors that .00 90.15 14.0 12.60 55.0 1.35 The Skindia GDR Monitor is a weekly (Friday-Thursday) review of Indian GDRs listed and traded on the London and Luxembourg stock exchanges.00 75.37 11.00 75.0 1.0 1.0 5.97 18.00 45.00 115.0 0. the review also includes the top three GDRs commanding the maximum premium and discount of the week ending Thursday.86 710.I.10 13.00 15.0 1.00 65.0 1.A.00 45. It also compares the movement of the Skindia GDR Index and the BSE Sensex during the week and in the last 30 .93 14.E.00 40.5 1.0 1. Sanghi Poly SIV Ind SPIC SBI Sterlite India# Tata Electric Telco (1st) Telco (2nd) Tube Invest United Phos.56 6. Pesticides Cables Electronics Telecomm.0 1.L.00 65.58 20.70 8.90 days.00 369.0 1.00 200.15 17.00 8.60 .0 2.0 5.S.00 35.0 1.L.00 527.75 14.95 100.64 9. Steel Satyam Infoway IT S. In addition.I.0 100. Usha Beltron Videocon Int. It gives statistical information of the top three gainers and losers in the GDR and domestic market for the week.0 3. VSNL Wockhardt Diversified Textiles Textiles Fertiliser Banking Diversified Power Autos Autos Cycles & Acc.0 14.25 6.50 10. Pharma 07-Mar96 19-Oct99 14-Oct94 28-Jul-94 01-Aug94 28-Sep93 03-Oct96 22-Dec93 22-Feb94 15-Jul-94 06-Aug96 20-May94 25-Feb94 06-Oct94 26-Jan94 24-Mar97 25-Feb94 125.
Further. Clients have access to order nos. The Over The Counter Exchange (OTC). The company has two trading screens linked via modems using a leased line and a dial up line to the OTC central computer. In addition.Skindia has been a member of the Capital Market segment (corporate equity and debt) since it commenced operations in November 1994. unsecured debentures. Calcutta and New Delhi Stock Exchanges. resulting in operations that afford complete transparency.) Domestic (Corporates. The NSE and OTC Exchange's fully automated screen-based trading systems ensure all deals are recorded. Asset Management Companies. Transparency Brokerage and finance operations in India have undergone rapid transformation. Krishan Chand. today Skindia Finance Pvt. Computerised back office reads directly from NSE and OTC systems resulting in an almost zero error rate. It also consists of a study which could either be an analysis of price movements of a sector or a statistical study.the first international placement for Indian investors. Curiously. The company carries out brokerage operations on all of the country's major stock markets either directly or through local brokers. The company has on some days accounted for upto 18% of NSE's turnover. Skindia publishes individual periodic reports i .. the Skindia Money Markets Group undertakes syndication of Bills of Exchange. on which the company operates through a panel of brokers. Ltd. Introducing Skindia Finance Incorporated in 1984.. market prices and trade time. Inter-Corporate Deposits and Special Obligations like short-term. • • • Client Profile Institutional Investors: Foreign (Hedge Funds. lead managers Nomura appointed Skindia as placement agents for India to handle a Hollywood mutual fund . The Bombay. is India's most important Special Situations brokerage firm focusing on GDR arbitrage. Asset Management Companies). The company began brokerage operations in 1992 and operates on the following exchanges: • The National Stock Exchange (NSE) . Skindia Finance's track record in Special Situations Brokerage has had unexpected spin-offs. trade nos.equities and debt with a Blue Chip client list. India's first screen-based trading system Skindia is among the leading Market Makers and Brokers.affected the GDR and domestic market during the week. Individual / Retail : NRIs Domestic high net-worth individuals. The company has three trading screens linked via V-Sat to the NSE central computer. In October 1994. Skindia Finance was promoted by Mr.
Chairman Mrs. The firm also provides the Daily GDR Update on all India's screen based news systems. Gaurav Chand Bankers : ANZ Grindlays Bank Citibank N.The Skindia GDR Index and the Skindia GDR Monitor One of the earliest contributions made by Skindia to the financial community was the Skindia GDR Index. The Times of India. Krishan Chand. Due to the high level of computerisation personalised reports are prepared and faxed at pre-determined times automatically. clients receive reports that study the market and recommend strategies for both investors and traders. Sudha Chand Mr. it is used as the standard at the IIF (Institute of International Finance). SBI Commercial & International Bank Karur Vysya Bank Auditors : Vaidya & Vyavaharkar . The Board. Today the most-quoted GDR index world-wide. Knight Ridder and Press Trust of India (PTI). Besides this. Global Trust Bank HDFC Bank Ltd. Washington.A. Bankers and Auditors Board of Directors : Mr. the firm generates the Skindia GDR Monitor every week which beams out of 4 exclusive pages on Knight Ridder. Apart from the above.
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