SOURCES OF RAISING

FUNDS IN
INTERNATIONAL
MARKETS

By:
MEGHA KUSHWAHA
 SOURCES

EURO ISSUE

FOREIGN
DEPOSITORY CURRENCY
RECEIPTS CONVERTIBLE
BONDS

AMERICAN GLOBAL
DEPOSITORY DEPOSITORY
RECEIPTS RECEIPTS
 DEPOSITORY RECEIPT

• It is a negotiable financial instrument issued by a

bank to represent a foreign company's publicly
traded securities.
• Through it, companies in India tap the global equity
market to raise foreign currency funds by way of
equity
• When the depository bank is in the U.S., the
instruments are known as American Depository
Receipts (ADRs). European banks issue European
depository receipts(EDRs), and other banks issue
global depository receipts (GDRs).
 AMERICAN DEPOSITORY RECEIPT (ADR)

• It is a negotiable security representing securities of a non-

US company trading in the US financial markets
• It is denominated in US dollars and may be traded like
regular shares of stock
• Securities of a foreign company that are represented by an
ADR are called American depository Shares(ADSs)
• INFOSYS Technologies Ltd was the first Indian company to
issue ADRs
 TYPES OF ADR

SPONSORED UNSPONSORED

• Issued with cooperation of • Issued by broker, dealer or

company whose stock will depository bank without the
underlie the ADR involvement of company
whose stock underlie ADR

• Listing on international • Trade in OTC market

Stock Exchange is allowed
 ADR RATIOS

• 1 ADR = 1 SHARE
SINGLE • ADR Ratio = 1:1

• 1 ADR = 5 SHARES
MULTIPLE • ADR Ratio = 1:5

• 1 ADR = ½ SHARE
FRACTION • ADR Ratio = 2:1
LIST OF ADRs ISSUED BY INDIAN COMPANIES
 GLOBAL DEPOSITORY RECEIPT (GDR)

• It is issued by one country’s bank as negotiable

certificate and is traded on the stock exchange of
another country against a certain number of shares
held in its custody
• It is denominated in some freely convertible currency
• GDRs are often listed in Luxembourg, London,
Frankfurt, Singapore and Dubai Stock Exchange
• Reliance Industries was the first Indian company to
issue GDRs
LIST OF GDRs ISSUED BY INDIAN COMPANIES
 ISSUE MECHANISM OF ADR/GDR

DOMESTIC
ISSUING COMPANY UNDERLYING SHARES
CUSTODIAN BANK
(DR. REDDY)
(SBI)

OVERSEAS OVERSEAS STOCK

DEPOSITORY BANK ISSUE OF DR EXCHANGE
(MORGAN STANLEY) (NYSE)

OVERSEAS INVESTOR DIVIDEND CLEARING HOUSE

PAYEMENT (DTC,EURO CLEAR)
ADVANTAGES OF ADR/GDR
FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB)

• They are debt instruments issued in a currency

different than the issuer’s domestic currency
with an option to convert them in common
shares of the issuer company
• The interest on FCCBs is generally 30% -40%
less than on normal debt paper or foreign
currency loans
• Maturity period of FCCB is 5 years but there is
no restriction on time period for converting
FCCB into shares
ADVANTAGES OF FCCB
PROBLEMS ASSOCIATED WITH RAISING OF
FUNDS IN INTERNATIONAL MAKETS
 INDIAN DEPOSITORY RECEIPT (IDR)

• It is issued and traded in a similar manner as

that ADR and GDR
• A foreign company lists its shares in Indian
domestic market in INR terms while the
underlying shares are listed and traded in any
foreign exchange
• Till date only Standard Chartered Bank has
issued IDRs. 10 IDRs represent one share of
Standard Chartered PLC’s share listed in
London Stock Exchange.
THANK YOU