Indian Corporate could opt to raise funds from overseas market through equity route comprising ADRs, GDRs and FCCBs. The size of the Indian companies is growing bigger, and these companies have understood that market for goods and services has become global besides having resources to go global. Such issuance also enhances the visibility, status and profile of the Company globally. Equity instruments from Indian Corporate have enough appetite in the oversea market from Foreign Institutional Investors as well as Non-residents.
Depository Receipts are negotiable financial instruments issued by a Bank, representing publicly traded security of a Corporate on bourses. These receipts are issued to tap overseas funds through equity route. When Bank issuing depository receipt is in US then that issuance is called as American Deposit Receipt whereas depository receipts issued by European Banks are known as European Deposit Receipts. The depository receipts issued by other Banks are called as Global Depository Receipts.
The associated parties for issuance of ADR/GDR are Issuing Company, Domestic Custodian Bank, Overseas Depository Bank and Overseas Stock Exchange. The payment of divided is routed through Clearing House to Overseas Investor.
ADRs represents negotiable security of a non-US company, which is traded on US financial markets. It is denominated in US dollars, representing certain number of shares, and is traded like a regular or common stock. InfoSys Technology was the first Indian Company to issue ADRs.
GDRs are issued by a Bank holding custody of certain number of shares, and is traded on stock exchange of another country. It is generally denominated in any freely convertible currency. GDRs are listed in London, Luxemberg, Frankfurt, Singapore and Dubai Stock Exchanges. Reliance Industries was the first Indian Company to issue GDRs.
FCCBs are quasi-debt instruments issued in a freely convertible currency with an option to convert them into common stock of the issuer. The coupon rate on FCCBs is decided based on the interest rate prevalent in the country of issuance. The FCCBs are issued for specified maturity period, and are traded on the Stock Exchange.
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