Final Adrgdr

8/4/2019 Final Adrgdr

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An ADR is a negotiable US certificaterepresenting ownership of shares in anon- US corporation. ADRs are quotedand traded in USD in the US securitiesMarket. Also the dividends are paid toinvestor in USDADRs were specifically designed to

facilitate the purchase , holding and of non-US securities by US Investor and toprovide a corporate finance vehicle for non US companies.

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Introduced 1927

Many non US companies, traded on US

exchanges through ADRs.

ADR enables US investor to buy share in

foreign coys w/o undertaking CBT

The shares of the non-US corporation

trade on a non-US exchange, while the

ADRs trade on a US exchange

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ADR ISSUE SYMBOL INDUSTRY EXCHANGE

Dr. Reddys Ltd. RDY Pharmaceuticals NYSEHDFC Bank HDB Bank NYSE

ICICI Bank IBN Bank NYSE

INFOSYS INFY Tech. Service NASDAQ

MTNL MTE Fixed LineComm. NYSE

Rediff REDEF Tech. Service NASDAQ

SATYAM Comp.Service

SAY Tech. Service NYSE

SIFY Ltd. SIFY Tech. Service NASDAQ

VSNL VSL Fixed LineComm.

NYSE

Wipro Ltd WIT Tech. Service NYSE


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Negotiable instrument denominated in

freely convertible currency

Global Funding Vehicle for raising

Capital

It can be traded globally in exchange or OTC market.

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May 1992 Reliance US$150mn

Market pulled down due to several

reasons.Political Instability, Falling markets

liquidity crunch etc.

Biggest Asian GDR issued by SBI in 1997

for US$350mn


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Bajaj AutoDr Reddys HDFC Bank

HindalcoICICI BankInfosys Tech.ITCL&TMNTL

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Ranbaxy Lab.Reliance IndustriesState Bank of India

VSNLWIPROTATA


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Let us take Infosys example- trades on theIndian stock at Rs.2000/-This is equivalent to US$ 40 assume for simplicity.Now as US Bank purchases 10000 shares of

Infosys and issues them in US in the ratio of 10:1This means each ADR purchased is worth 10Infosys shares.

Quick calculation means 1ADR=US$400Once ADR are priced and sold, its subsequentprice is determined by supply and demandfactors, like any ordinary shares


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ADR listing :NASDAQAMEXNYSE

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GDR Listing :London StockExchange

Luxembourg StockExchangeDIFXSingapore ExchangeHong Kong Exchange


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Basics of

Comparison

Center

GAAP

ADR

The NYSE which isthe largest stockexchange in theworld is where theADR is traded.

Foreign Companieslisting in the USmust reconcile their accounts to USGAAP

GDR

The LSE is not aslarge as the NYSEover all, but in theGlobal centre for internationalequities, whichdominate in turnover

The LSE satisfiedwith a statement of the differencebetween the UK andIndian Account Stds.

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Basics of

Comparison

Retail

Liability

ADR

A public offering inthe US allows anissuers to access theUS retail market.This provides extrasource of demand.

Legal liability of botha company and itsindividual directorsincreased by a fullUS listing

GDR

GDR is issued only toQIBs but ordinaryinvestors cannotparticipate

Legal liability of acompany and itsdirectors is less thanin the case of anADR.

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Basics of Comparison

Cost

ADR

US listing could beexpensive. Totalinitial cost likelyto be in the rangeof US$ 10,00,000to US$ 20,00,000

GDR

GDR listing on LSEis comparativelyinexpensive. Initialcosts likely to bein range US$2,00,000 to US$4,00,000

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Investment by the Indian Co. dose not exceedthe higher of an amount equivalent to USD 100million or an amount equivalent to 10 times theexport earnings of the Indian Co. during thepreceding FY.

At least 80% of the average turnover of theIndian party in the previous 3 financial years isform the activities/sectors included in Scheduleof the Indian Party has an annual averageexport earnings of at least Indian Rupees 1000Million in the previous three FY from theactivities/sectors included in Sch-1 to FEMA 19


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The ADR/GDR issue is backed by a fresh issueof underlying equity shares by the Indiancompany.The total holding in the Indian co. by non-resident holders does not exceed the

prescribed sectorial cap.The valuation of the shares of the foreign co. isdone in the following manner:

If the shares of the foreign company are not listed, then asper the recommendation of an investment banker, or If the shares of the foreign company are listed then as per the formula prescribed therein.

Within 30 days from the date of issue of ADRs/GDRs in exchange of acquisition of shares of the foreign company, the Indian company is required to submit a report in Form

ODG with RDI.


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BSEL Infra Reality: Raised USD 35.30 Mn viaGDR issue as of Jan 08Indusland Bank: Raised USD 51.73 Mn throughGDRs as of Jun08, listed on the LuxembourgStock Exchange

Indiabulls Real Estate Ltd.: Raised USD 400 Mnin Jul2007, listed on the Luxembourg StockExchange. Accentia Technologies: Listed USD20 Mn worth

of GDR at Rs.10/- per share on the SingaporeExchange. It has already acquired two HRCMcompanies in US and in process of acquiring 3others in India.


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BSEL Infra Reality: Raised USD 35.30 Mn viaGDR issue as of Jan 08Indusland Bank: Raised USD 51.73 Mn throughGDRs as of Jun08, listed on the LuxembourgStock Exchange

Indiabulls Real Estate Ltd.: Raised USD 400 Mnin Jul2007, listed on the Luxembourg StockExchange. Accentia Technologies: Listed USD20 Mn worth

of GDR at Rs.10/- per share on the SingaporeExchange. It has already acquired two HRCMcompanies in US and in process of acquiring 3others in India.


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Tata Power : Largest Pvt. Sector Power

Installed generation Cap. Over 2700MWPresence in all segment of power sector viz. thermal,hydro, solar & wind.The company has successful public-pvt partnershipsin.

Generation, Transmission & Distribution- North Delhi Power Distribution with Delhi Vidyut Board for Distribution.

PowerLinks Transmission Ltd. with Power Grid Corporation of India for evacuation of Power from Tata Hydro Plant, Bhutan toDelhi

Maithon Power Ltd. with Damodar Valley Corporation for 1050

MW Megha Power Project at Jharkhand.

It has acquired 30% stake in Coal Companies at Indonesia andis developing the First 4000MW Ultra Megha Power Project atMundra(Gujarat) based on super-critical technology

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On July 22, 2009

The Tata Power Co.Ltd. Announced that it has pricedand equity offering in the form of GDRs for a gross amtof USD 335mnOut of this, each GDR will represent 1 equity share, of a nominal value Rs.10 per equity share of the Co.

The Co. will be issuing 14838110 GDRs and each GDRhas been priced ppriced at USD22.577 (Rs.48.27 is thereference exchange rate)

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Depository Receipt ADR - American Depositary Receipt

An ADR represents ownership in the shares of anon-U.S. company and trades in U.S. financialmarkets.

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GDR - Global Depositary Receipt

GDR is a certificate issued by a depository bank,

which purchases shares of foreign companies.

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GDR

Centre NYSEDisclosure RequiresComprehensive Disclosure.

GAAP Company accountsmust be reconciled to USGAAP.Cost Comparatively higher.Retail US retail marketcan be accessed.Liability Legal liability ismore.

Centre LSEDisclosure Only DetailedInformation Required.

GAAP Satisfied with Statement of differencebetween the A/c Standards.Cost Comparatively lower.

Retail

Only QIBs allowedin US.Liability Comparatively less than ADR.

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ADR


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Lead managerCo-manager

OverseasDepository BanksDomestic

Custodian Bank

Listing agentLegal advisors

PrintersAuditorsUnderwriters


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IssuingCompany

Possessionof shares with the

CustodianBank

Depository BankIssuesDepository Receipts toinvestors


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5Company issues Ordinary Shares

Kept with Domestic Custodian

Transferred to the Overseas Depository Bank

ADRs /GDRs are issued by ODB

Receipts given to the foreign investors


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Appoint Listing Agent / Lead manger

Due Diligence

Required financialstatements

Positioning

ValuationDeal Structure

Prepare prospectus Presentation material andQ & A practice

Apply for listing &regulatory approval

through listing agent Analyst Meeting

Premarketing toInstitutions

Road shows & marketing to investors

List on Eurolist , Start trading


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Types of ADRs

Unsponsored Sponsored

Level I Private placementLevel II Level III


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Created in response of investors, brokers - dealers anddepository.Exempted from reporting requirements of the SEC.Not Listed on any exchange.

Advantages:Inexpensive.Expands investors base.Minimal SEC compliance andreporting requirements.

Disadvantages:No control over theactivity.Conversionbecomes costly.


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Initiated by Issuer.Established jointly by an Issuer and Depository.

Agreement between Issuer and Depository.

Depository provides shareholders communication andother information to ADR holders.

Through Depository ADR holders can exercise votingrights.


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Capital can be raised by placing Depositary Receipts

with large institutional investors.

Do not have to conform full SEC reporting andregistration requirements.

Cheaper means of raising equity capital.

Can only be sold to QIBs.


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Improvement in Liquidity

Elimination of Arbitrage.


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Dividend will be taxed @10 %All transactions of trading of the GDRs outsideIndia, among non-resident investors, will be freefrom any liability of income tax in India.Capital gains arising on the redemption of shares will be liable to income tax Section 115AC.

Long-term capital gains tax @ 10 %Short-term capital gains tax@ 15 %(Section 195 and 196 of IT Act).

34 Advanced Financial Management


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Private Sector Banking 74% Drugs & Pharmaceuticals 100%Non-Banking FinancialCompanies

100% Road and highways, Ports andharbours

100%

Insurance 26% Hotel & Tourism 100%

TelecommunicationsServices

74% Mining 74-100%

Petroleum Refining-Private Sector

100% Advertising 100%

Housing and Real Estate 100% Films 100%

Trading 51-100% Airports 74%

Coal & Lignite 50-100% Mass Rapid Transport Systems 100%

Power 100% Pollution Control & Mng. 100%

Air transport Services

(no foreign airlines)

100% -NRIs,

49% others

Special Economic Zones 100%


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Documents

Final Adrgdr