What is DR?

DR means depository receipt of anything.

TYPES OF DR AVAILABLE IN MARKET ADR GDR EDR / SDR IDR .

DRs Receipt .DRs .RIL IDR .comply policies of stock exchanges Investing directly . problematic Investing indirectly . risky.predefined number of shares Listed on stock exchanges ADR .what are they and how do they work? Company .Infosys GDR .expensive.

144-A and Regulation S .Mechanism for ADR. GDR and IDR ‡ ADR Programs formed in1927 Sponsered / Unsponsored shares Level I Level II (listed) Level III (offering) Restricted programs .

Comparison Level I & II .

.

360° Perspective of ADR/GDR/IDR ‡ Investor Perspective ‡ Company Perspective ‡ Economy Perspective .

Investor Perspective ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Global portfolio Benefits of higher risk.S. Dollars Settlement of trade as per US system (T+3) Easy access to markets Transparency Lot of research on Co available in market Tax efficient Prompt dividend payments . higher return equities Quoted and traded in U.

Reduce Volatility and cornering of share . Boosting the company's prestige. Enlarged investor base. International shareholder base. Costs of Cross Listing. Greater exposure & Share s liquidity.Company Perspective ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Raise capital from international market. Stock-swap acquisition.

Company Perspective ‡ Arbitrage opportunities Repatriate funds Buy DR Deposit proceeds in Indian bank account Sell local stock in India Deliver shares to stock exchange in India Convert shares from DR to local .

Capital Export Neutrality .Economy s Perspective ‡ Coupling of global economies ‡ Risks ± Political Risk ± Exchange Rate Risk ± Inflationary Risk ‡ Impact on Company s Valuation Forex exposure ‡ Policy Part i. Capital Import Neutrality ii.

or a group of cos. ADRs .treated as FDI No restriction on the number of GDRs/ADRs/FCCBs floated by a co. GoI Co. in a financial year No end-use restrictions on GDR/ADR issue proceeds on investment in real estate and stock markets except ban .GDRs.Regulations: Issue of ADRs/GDRs by Indian Companies Issue ADRs/GDRs if eligible in terms of the Scheme for Issue of FCCB and OS (Through DR) Scheme. 1993 and guidelines issued by MoF. should not be ineligible to issue shares to non-resident persons in terms of the Foreign Exchange Management Act (FEMA) Foreign investment .

on behalf of a person resident outside India to convert the shares so purchased into ADRs/GDRs Purchase and re-conversion of shares which is equal to or less than the number of shares emerging on surrender of ADRs/GDRs which have been actually sold in the market Benefits of Fungibility Improvement in liquidity and Elimination of arbitrage .Two-way Fungibility Scheme of ADR/GDR/IDR Registered broker in India can purchase shares of Indian co.

ADRs & GDRs .

a domestic depository and a merchant banker for the purpose of issue of IDRs .Procedure for making IDR Issue Cannot raise funds in India by issuing IDR without permission from the SEBI Application seeking permission made to the SEBI at least 90 days prior to the opening date of the issue with a non-refundable fee of US $10.000 Issuing co. shall obtain necessary approvals/exemption from the appropriate authorities from the country of its incorporation under the relevant laws relating to issue of capital Issuing co. shall appoint an overseas custodian bank.

‡ The IDRs opened at the Bombay Stock Exchange and National Stock Exchange on June 11 . ‡ Every 10 IDRs represents one share of the bank. ‡ Standard Chartered fixed its issue price for Indian Depository Receipts at Rs 104 per unit.to 115/-.CASE STUDY STAN CHART-IDR ‡ Stan Chart opened its offering to Indian investor on 25 May 10 with a price band of Rs 100/.

CASE STUDY STAN CHART-IDR ‡ Standard Chartered PLC s Indian Depository Receipt. listed at Rs 106. exceeded expectations by Rs 2 or 1. ‡ FUNGIBILITY ISSUES ‡ The SEBI regulations and the RBI circular state that automatic fungibility of IDRs is not permitted. fungibility of IDRs into the underlying shares would be permitted only after the expiry of one year period from the date of issue of IDRs and subsequent to obtaining RBI approval on a case-by-case basis .92 per cent on the National Stock Exchange. Therefore.

One way FUNGIBILITY. ‡ ‡ ‡ ‡ . ‡ RIGHT ISSUE BY STAN CHART-IDR. IDRs shall be deemed to be infrequently traded if the annualised trading turnover in IDRs during the six calendar months immediately preceding the month of redemption is less than five percent of the listed IDRs. said SEBI.CASE STUDY STAN CHART-IDR Two way FUNGIBILITY. SEBI VIEW POINT.

50 crores 90% of the issue must be subscribed Automatic fungibility is not permitted .Who can Invest in IDRs??? Indian Companies Qualified Institutional Buyers NRI s and FII s with permission of RBI The Issue The minimum issue size is Rs.

Sign up to vote on this title
UsefulNot useful