Global depository receipts
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Depositary Receipts
Presented by Rajesh Kumar MBA(Finance) ACS AIII
Depositary A depository is like a bank wherein the deposits are
securities (viz shares debentures bonds government securities units etc) in electronic form at the request of the shareholder through the medium of a Depository Participant
If an investor wants to utilize the services offered by a Depository the investor has to open an account with the Depository through a Depository Participant
Depositary Receipt A Depositary Receipt is a negotiable security that represents an ownership interest in
securities of a foreign issuer typically trading outside its home market
Depositary Receipts are created when a broker purchases a foreign companys shares on
its home stock market and delivers the shares to the depositarys local custodian bank
and then instructs the depositary bank to issue Depositary Receipts
In addition Depositary Receipts may also be purchased in the secondary trading market
They may trade freely just like any other security either on an exchange or in the over-
the-counter market and can be used to raise capital
ADRs were the first type of depositary receipt to evolve They were introduced in 1927 in
response to a law passed in Britain which prohibited British companies from registering
shares overseas without a British-based transfer agent
bull DRs are traded on Stock Exchanges in the US Singapore Luxembourg London etc
bull DRs listed and traded in US markets are known as American Depository Receipts (ADRs) and those listed and traded elsewhere are known as Global Depository Receipts (GDRs) In Indian context DRs are treated as FDI
INTERNATIONAL CAPITAL MARKET
INTERNATIONAL EQUITY MARKETINTERNATIONAL BOND MARKET
EURO BOND FOREIGN BOND ADRGDR
Issued by one depository appointed by the company under a Deposit Agreement or service contract
May be issued in different levels (level I II or III)
Company bears all expenses
New capital may also be raised under this option
Set up at the request of 3rd party without any formal agreement with company
Issued by one or more depositories in response to market demand
3rd party pays all set up and maintenance expenses
No new capital is raised
Types of DRs
Sponsored DRs Unsponsored DRs
TYPES OF DRSTYPES OF DRS
Level I ADR Over-the-Counter (OTC) Traded
Level I GDR Unlisted
Level II ADRUS Listed
Level II GDRInternationally Listed
Level III ADRUS Listed
Level III GDRInternationally Listed
Selling New Shares
(Capital Raising Transactions)
Existing Shares Only
(Non-Capital Raising Transactions)
Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)
Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S
Issuer
LEVELS OF DRSLEVELS OF DRS
AMERICAN DEPOSITORY RECEIPTS
bull ADR is a dollar-denominated negotiable certificate It represents a non-US companyrsquos publicly traded equity It was devised in the late 1920s to help Americans invest in overseas securities and to assist non-US companies wishing to have their stock traded in the American Markets
bull ADR were introduced as a result of of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values
Levels of ADR
bull Level 1- Level 1 depositary receipts are the lowest level of sponsored ADRs that can be issued When a company issues sponsored ADRs it has one designated depositary who also acts as its transfer agent
bull Level 1 shares can only be traded on the OTC market and the company has minimal reporting requirements with the US Securities and Exchange Commission [SEC]
bull Level 2- Level 2 depositary receipt programs are more complicated for a foreign company When a foreign company wants to set up a Level 2 program it must file a registration statement with the US SEC and is under SEC regulation
bull The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a US stock exchange These exchanges include the New York Stock Exchange (NYSE) NASDAQ and the American Stock Exchange (AMEX)
bull Level 3- A Level 3 American Depositary Receipt program is the highest level a foreign company can sponsor Because of this distinction the company is required to adhere to stricter rules that are similar to those followed by US companies
bull Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their US shareholders because they rely on them for capital
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Depositary A depository is like a bank wherein the deposits are
securities (viz shares debentures bonds government securities units etc) in electronic form at the request of the shareholder through the medium of a Depository Participant
If an investor wants to utilize the services offered by a Depository the investor has to open an account with the Depository through a Depository Participant
Depositary Receipt A Depositary Receipt is a negotiable security that represents an ownership interest in
securities of a foreign issuer typically trading outside its home market
Depositary Receipts are created when a broker purchases a foreign companys shares on
its home stock market and delivers the shares to the depositarys local custodian bank
and then instructs the depositary bank to issue Depositary Receipts
In addition Depositary Receipts may also be purchased in the secondary trading market
They may trade freely just like any other security either on an exchange or in the over-
the-counter market and can be used to raise capital
ADRs were the first type of depositary receipt to evolve They were introduced in 1927 in
response to a law passed in Britain which prohibited British companies from registering
shares overseas without a British-based transfer agent
bull DRs are traded on Stock Exchanges in the US Singapore Luxembourg London etc
bull DRs listed and traded in US markets are known as American Depository Receipts (ADRs) and those listed and traded elsewhere are known as Global Depository Receipts (GDRs) In Indian context DRs are treated as FDI
INTERNATIONAL CAPITAL MARKET
INTERNATIONAL EQUITY MARKETINTERNATIONAL BOND MARKET
EURO BOND FOREIGN BOND ADRGDR
Issued by one depository appointed by the company under a Deposit Agreement or service contract
May be issued in different levels (level I II or III)
Company bears all expenses
New capital may also be raised under this option
Set up at the request of 3rd party without any formal agreement with company
Issued by one or more depositories in response to market demand
3rd party pays all set up and maintenance expenses
No new capital is raised
Types of DRs
Sponsored DRs Unsponsored DRs
TYPES OF DRSTYPES OF DRS
Level I ADR Over-the-Counter (OTC) Traded
Level I GDR Unlisted
Level II ADRUS Listed
Level II GDRInternationally Listed
Level III ADRUS Listed
Level III GDRInternationally Listed
Selling New Shares
(Capital Raising Transactions)
Existing Shares Only
(Non-Capital Raising Transactions)
Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)
Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S
Issuer
LEVELS OF DRSLEVELS OF DRS
AMERICAN DEPOSITORY RECEIPTS
bull ADR is a dollar-denominated negotiable certificate It represents a non-US companyrsquos publicly traded equity It was devised in the late 1920s to help Americans invest in overseas securities and to assist non-US companies wishing to have their stock traded in the American Markets
bull ADR were introduced as a result of of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values
Levels of ADR
bull Level 1- Level 1 depositary receipts are the lowest level of sponsored ADRs that can be issued When a company issues sponsored ADRs it has one designated depositary who also acts as its transfer agent
bull Level 1 shares can only be traded on the OTC market and the company has minimal reporting requirements with the US Securities and Exchange Commission [SEC]
bull Level 2- Level 2 depositary receipt programs are more complicated for a foreign company When a foreign company wants to set up a Level 2 program it must file a registration statement with the US SEC and is under SEC regulation
bull The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a US stock exchange These exchanges include the New York Stock Exchange (NYSE) NASDAQ and the American Stock Exchange (AMEX)
bull Level 3- A Level 3 American Depositary Receipt program is the highest level a foreign company can sponsor Because of this distinction the company is required to adhere to stricter rules that are similar to those followed by US companies
bull Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their US shareholders because they rely on them for capital
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Depositary Receipt A Depositary Receipt is a negotiable security that represents an ownership interest in
securities of a foreign issuer typically trading outside its home market
Depositary Receipts are created when a broker purchases a foreign companys shares on
its home stock market and delivers the shares to the depositarys local custodian bank
and then instructs the depositary bank to issue Depositary Receipts
In addition Depositary Receipts may also be purchased in the secondary trading market
They may trade freely just like any other security either on an exchange or in the over-
the-counter market and can be used to raise capital
ADRs were the first type of depositary receipt to evolve They were introduced in 1927 in
response to a law passed in Britain which prohibited British companies from registering
shares overseas without a British-based transfer agent
bull DRs are traded on Stock Exchanges in the US Singapore Luxembourg London etc
bull DRs listed and traded in US markets are known as American Depository Receipts (ADRs) and those listed and traded elsewhere are known as Global Depository Receipts (GDRs) In Indian context DRs are treated as FDI
INTERNATIONAL CAPITAL MARKET
INTERNATIONAL EQUITY MARKETINTERNATIONAL BOND MARKET
EURO BOND FOREIGN BOND ADRGDR
Issued by one depository appointed by the company under a Deposit Agreement or service contract
May be issued in different levels (level I II or III)
Company bears all expenses
New capital may also be raised under this option
Set up at the request of 3rd party without any formal agreement with company
Issued by one or more depositories in response to market demand
3rd party pays all set up and maintenance expenses
No new capital is raised
Types of DRs
Sponsored DRs Unsponsored DRs
TYPES OF DRSTYPES OF DRS
Level I ADR Over-the-Counter (OTC) Traded
Level I GDR Unlisted
Level II ADRUS Listed
Level II GDRInternationally Listed
Level III ADRUS Listed
Level III GDRInternationally Listed
Selling New Shares
(Capital Raising Transactions)
Existing Shares Only
(Non-Capital Raising Transactions)
Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)
Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S
Issuer
LEVELS OF DRSLEVELS OF DRS
AMERICAN DEPOSITORY RECEIPTS
bull ADR is a dollar-denominated negotiable certificate It represents a non-US companyrsquos publicly traded equity It was devised in the late 1920s to help Americans invest in overseas securities and to assist non-US companies wishing to have their stock traded in the American Markets
bull ADR were introduced as a result of of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values
Levels of ADR
bull Level 1- Level 1 depositary receipts are the lowest level of sponsored ADRs that can be issued When a company issues sponsored ADRs it has one designated depositary who also acts as its transfer agent
bull Level 1 shares can only be traded on the OTC market and the company has minimal reporting requirements with the US Securities and Exchange Commission [SEC]
bull Level 2- Level 2 depositary receipt programs are more complicated for a foreign company When a foreign company wants to set up a Level 2 program it must file a registration statement with the US SEC and is under SEC regulation
bull The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a US stock exchange These exchanges include the New York Stock Exchange (NYSE) NASDAQ and the American Stock Exchange (AMEX)
bull Level 3- A Level 3 American Depositary Receipt program is the highest level a foreign company can sponsor Because of this distinction the company is required to adhere to stricter rules that are similar to those followed by US companies
bull Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their US shareholders because they rely on them for capital
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
bull DRs are traded on Stock Exchanges in the US Singapore Luxembourg London etc
bull DRs listed and traded in US markets are known as American Depository Receipts (ADRs) and those listed and traded elsewhere are known as Global Depository Receipts (GDRs) In Indian context DRs are treated as FDI
INTERNATIONAL CAPITAL MARKET
INTERNATIONAL EQUITY MARKETINTERNATIONAL BOND MARKET
EURO BOND FOREIGN BOND ADRGDR
Issued by one depository appointed by the company under a Deposit Agreement or service contract
May be issued in different levels (level I II or III)
Company bears all expenses
New capital may also be raised under this option
Set up at the request of 3rd party without any formal agreement with company
Issued by one or more depositories in response to market demand
3rd party pays all set up and maintenance expenses
No new capital is raised
Types of DRs
Sponsored DRs Unsponsored DRs
TYPES OF DRSTYPES OF DRS
Level I ADR Over-the-Counter (OTC) Traded
Level I GDR Unlisted
Level II ADRUS Listed
Level II GDRInternationally Listed
Level III ADRUS Listed
Level III GDRInternationally Listed
Selling New Shares
(Capital Raising Transactions)
Existing Shares Only
(Non-Capital Raising Transactions)
Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)
Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S
Issuer
LEVELS OF DRSLEVELS OF DRS
AMERICAN DEPOSITORY RECEIPTS
bull ADR is a dollar-denominated negotiable certificate It represents a non-US companyrsquos publicly traded equity It was devised in the late 1920s to help Americans invest in overseas securities and to assist non-US companies wishing to have their stock traded in the American Markets
bull ADR were introduced as a result of of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values
Levels of ADR
bull Level 1- Level 1 depositary receipts are the lowest level of sponsored ADRs that can be issued When a company issues sponsored ADRs it has one designated depositary who also acts as its transfer agent
bull Level 1 shares can only be traded on the OTC market and the company has minimal reporting requirements with the US Securities and Exchange Commission [SEC]
bull Level 2- Level 2 depositary receipt programs are more complicated for a foreign company When a foreign company wants to set up a Level 2 program it must file a registration statement with the US SEC and is under SEC regulation
bull The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a US stock exchange These exchanges include the New York Stock Exchange (NYSE) NASDAQ and the American Stock Exchange (AMEX)
bull Level 3- A Level 3 American Depositary Receipt program is the highest level a foreign company can sponsor Because of this distinction the company is required to adhere to stricter rules that are similar to those followed by US companies
bull Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their US shareholders because they rely on them for capital
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
INTERNATIONAL CAPITAL MARKET
INTERNATIONAL EQUITY MARKETINTERNATIONAL BOND MARKET
EURO BOND FOREIGN BOND ADRGDR
Issued by one depository appointed by the company under a Deposit Agreement or service contract
May be issued in different levels (level I II or III)
Company bears all expenses
New capital may also be raised under this option
Set up at the request of 3rd party without any formal agreement with company
Issued by one or more depositories in response to market demand
3rd party pays all set up and maintenance expenses
No new capital is raised
Types of DRs
Sponsored DRs Unsponsored DRs
TYPES OF DRSTYPES OF DRS
Level I ADR Over-the-Counter (OTC) Traded
Level I GDR Unlisted
Level II ADRUS Listed
Level II GDRInternationally Listed
Level III ADRUS Listed
Level III GDRInternationally Listed
Selling New Shares
(Capital Raising Transactions)
Existing Shares Only
(Non-Capital Raising Transactions)
Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)
Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S
Issuer
LEVELS OF DRSLEVELS OF DRS
AMERICAN DEPOSITORY RECEIPTS
bull ADR is a dollar-denominated negotiable certificate It represents a non-US companyrsquos publicly traded equity It was devised in the late 1920s to help Americans invest in overseas securities and to assist non-US companies wishing to have their stock traded in the American Markets
bull ADR were introduced as a result of of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values
Levels of ADR
bull Level 1- Level 1 depositary receipts are the lowest level of sponsored ADRs that can be issued When a company issues sponsored ADRs it has one designated depositary who also acts as its transfer agent
bull Level 1 shares can only be traded on the OTC market and the company has minimal reporting requirements with the US Securities and Exchange Commission [SEC]
bull Level 2- Level 2 depositary receipt programs are more complicated for a foreign company When a foreign company wants to set up a Level 2 program it must file a registration statement with the US SEC and is under SEC regulation
bull The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a US stock exchange These exchanges include the New York Stock Exchange (NYSE) NASDAQ and the American Stock Exchange (AMEX)
bull Level 3- A Level 3 American Depositary Receipt program is the highest level a foreign company can sponsor Because of this distinction the company is required to adhere to stricter rules that are similar to those followed by US companies
bull Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their US shareholders because they rely on them for capital
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Issued by one depository appointed by the company under a Deposit Agreement or service contract
May be issued in different levels (level I II or III)
Company bears all expenses
New capital may also be raised under this option
Set up at the request of 3rd party without any formal agreement with company
Issued by one or more depositories in response to market demand
3rd party pays all set up and maintenance expenses
No new capital is raised
Types of DRs
Sponsored DRs Unsponsored DRs
TYPES OF DRSTYPES OF DRS
Level I ADR Over-the-Counter (OTC) Traded
Level I GDR Unlisted
Level II ADRUS Listed
Level II GDRInternationally Listed
Level III ADRUS Listed
Level III GDRInternationally Listed
Selling New Shares
(Capital Raising Transactions)
Existing Shares Only
(Non-Capital Raising Transactions)
Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)
Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S
Issuer
LEVELS OF DRSLEVELS OF DRS
AMERICAN DEPOSITORY RECEIPTS
bull ADR is a dollar-denominated negotiable certificate It represents a non-US companyrsquos publicly traded equity It was devised in the late 1920s to help Americans invest in overseas securities and to assist non-US companies wishing to have their stock traded in the American Markets
bull ADR were introduced as a result of of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values
Levels of ADR
bull Level 1- Level 1 depositary receipts are the lowest level of sponsored ADRs that can be issued When a company issues sponsored ADRs it has one designated depositary who also acts as its transfer agent
bull Level 1 shares can only be traded on the OTC market and the company has minimal reporting requirements with the US Securities and Exchange Commission [SEC]
bull Level 2- Level 2 depositary receipt programs are more complicated for a foreign company When a foreign company wants to set up a Level 2 program it must file a registration statement with the US SEC and is under SEC regulation
bull The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a US stock exchange These exchanges include the New York Stock Exchange (NYSE) NASDAQ and the American Stock Exchange (AMEX)
bull Level 3- A Level 3 American Depositary Receipt program is the highest level a foreign company can sponsor Because of this distinction the company is required to adhere to stricter rules that are similar to those followed by US companies
bull Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their US shareholders because they rely on them for capital
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Level I ADR Over-the-Counter (OTC) Traded
Level I GDR Unlisted
Level II ADRUS Listed
Level II GDRInternationally Listed
Level III ADRUS Listed
Level III GDRInternationally Listed
Selling New Shares
(Capital Raising Transactions)
Existing Shares Only
(Non-Capital Raising Transactions)
Rule 144A - Rule 144A ADR or restricted ADR (RADR) are simply privately placed depositary receipts which are issued and traded in accordance with Rule 144A Under this program DRs are privately placed in the US to Qualified Institutional Buyers (QIBs)
Regulation S ndash Regulation S programs provide for the placement of Depository Receipts offshore to Non-US investors in compliance with SEC Regulation S
Issuer
LEVELS OF DRSLEVELS OF DRS
AMERICAN DEPOSITORY RECEIPTS
bull ADR is a dollar-denominated negotiable certificate It represents a non-US companyrsquos publicly traded equity It was devised in the late 1920s to help Americans invest in overseas securities and to assist non-US companies wishing to have their stock traded in the American Markets
bull ADR were introduced as a result of of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values
Levels of ADR
bull Level 1- Level 1 depositary receipts are the lowest level of sponsored ADRs that can be issued When a company issues sponsored ADRs it has one designated depositary who also acts as its transfer agent
bull Level 1 shares can only be traded on the OTC market and the company has minimal reporting requirements with the US Securities and Exchange Commission [SEC]
bull Level 2- Level 2 depositary receipt programs are more complicated for a foreign company When a foreign company wants to set up a Level 2 program it must file a registration statement with the US SEC and is under SEC regulation
bull The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a US stock exchange These exchanges include the New York Stock Exchange (NYSE) NASDAQ and the American Stock Exchange (AMEX)
bull Level 3- A Level 3 American Depositary Receipt program is the highest level a foreign company can sponsor Because of this distinction the company is required to adhere to stricter rules that are similar to those followed by US companies
bull Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their US shareholders because they rely on them for capital
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
AMERICAN DEPOSITORY RECEIPTS
bull ADR is a dollar-denominated negotiable certificate It represents a non-US companyrsquos publicly traded equity It was devised in the late 1920s to help Americans invest in overseas securities and to assist non-US companies wishing to have their stock traded in the American Markets
bull ADR were introduced as a result of of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values
Levels of ADR
bull Level 1- Level 1 depositary receipts are the lowest level of sponsored ADRs that can be issued When a company issues sponsored ADRs it has one designated depositary who also acts as its transfer agent
bull Level 1 shares can only be traded on the OTC market and the company has minimal reporting requirements with the US Securities and Exchange Commission [SEC]
bull Level 2- Level 2 depositary receipt programs are more complicated for a foreign company When a foreign company wants to set up a Level 2 program it must file a registration statement with the US SEC and is under SEC regulation
bull The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a US stock exchange These exchanges include the New York Stock Exchange (NYSE) NASDAQ and the American Stock Exchange (AMEX)
bull Level 3- A Level 3 American Depositary Receipt program is the highest level a foreign company can sponsor Because of this distinction the company is required to adhere to stricter rules that are similar to those followed by US companies
bull Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their US shareholders because they rely on them for capital
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Levels of ADR
bull Level 1- Level 1 depositary receipts are the lowest level of sponsored ADRs that can be issued When a company issues sponsored ADRs it has one designated depositary who also acts as its transfer agent
bull Level 1 shares can only be traded on the OTC market and the company has minimal reporting requirements with the US Securities and Exchange Commission [SEC]
bull Level 2- Level 2 depositary receipt programs are more complicated for a foreign company When a foreign company wants to set up a Level 2 program it must file a registration statement with the US SEC and is under SEC regulation
bull The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a US stock exchange These exchanges include the New York Stock Exchange (NYSE) NASDAQ and the American Stock Exchange (AMEX)
bull Level 3- A Level 3 American Depositary Receipt program is the highest level a foreign company can sponsor Because of this distinction the company is required to adhere to stricter rules that are similar to those followed by US companies
bull Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their US shareholders because they rely on them for capital
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
bull The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a US stock exchange These exchanges include the New York Stock Exchange (NYSE) NASDAQ and the American Stock Exchange (AMEX)
bull Level 3- A Level 3 American Depositary Receipt program is the highest level a foreign company can sponsor Because of this distinction the company is required to adhere to stricter rules that are similar to those followed by US companies
bull Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their US shareholders because they rely on them for capital
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
What is a GDR
bull It is an instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to Non- resident investor against the issue of ordinary shares or Foreign Currency Convertible Bonds of Issuing Company
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Eligibility for Issue of GDRs
bull An Indian corporate can raise foreign currency resources abroad through the issue of Global Depository Receipts (GDRs) Regulation 4 of Schedule I of FEMA Notification no 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing GDRs
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
DIFFERNCE BETWEEN ADR amp GDRADR GDR
American depository receipt (ADR) is compulsory for non ndashus companies to trade in stock market of USA
Global depository receipt (GDR) is compulsory for foreign company to access in any other countryrsquos share market for dealing in stock
ADRs can get from level 1 to level III
GDRs are already equal to high preference receipt of level II and level III
ADRs up to level ndashI need to accept only general condition of SEC of USA
GDRs can only be issued under rule 144 A after accepting strict rules of SEC of USA
ADR is only negotiable in USA GDR is negotiable instrument all over the world
Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
ADVANTAGES OF ADRGDR
bull Can be listed on any of the overseas stock exchanges OTCBook entry transfer system
bull Freely transferable by non-residentbull They can be redeemed by ODBbull The ODB should request DCB to get the
corresponding underlying shares released in favor of non resident of investors (Shareholders of issuing companies)
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Benefits to the Company
bull Expanded market share through broadened and more diversified investor exposure with potentially greater liquidity which may increase or stabilize the share price
bull Enhanced visibility and image for the companyrsquos products services and financial instruments in a marketplace outside its home country
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Company Benefits (contrsquod)
bull Flexible mechanism for raising capital and a vehicle or currency for mergers and acquisitions
bull Enables employees of US subsidiaries of non-US companies to invest more easily in the parent company
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Benefits to the Investor
bull Quotation in US dollars and payment of dividends or interest in US dollars (or in general a persons home currency)
bull Diversification without many of the obstacles that mutual funds pension funds and other institutions may have in purchasing and holding securities outside of their local market
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Investor Benefits (contrsquod)
bull Elimination of global custodian safekeeping charges potentially saving Depositary Receipt investors up to 10 to 40 basis points annually
bull Familiar trade clearance and settlement procedures
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Investor Benefits (contrsquod)
bull Competitive US dollarforeign exchange rate conversion for dividends and other cash distributions
bull Ability to acquire the underlying securities directly upon cancellation
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Conditions for Issue of GDRsbull The GDRs are issued in accordance with the Scheme
for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 and guidelines issued by the Central Government thereunder from time to time
bull A GDR is permitted by RBI under Automatic Route subject to the sectoral caps as specified vide Press Note No14 (1997 series) dated 8th October 1997 issued by the Government of India Ministry of Industry
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Conditions for Issue of GDRs contdhellip
bull The company not covered under the Automatic route would need to obtain prior Government clearance through FIPB
bull There are no end-use restrictions on GDRADR issue proceeds except for an express ban on investment in real estate and stock markets
bull There is no limit up to which an Indian company can raise GDRs
bull There is no restriction on the number of Euro-Issues to be floated by a company or a group of companies in a financial year
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Conditions for Issue of GDRs contdhellip
bull Indian Companies engaged in the following sectors were 80 of turnover is from these sectors in 3 previous financial years can issue GDRs to their Non-ResidentResident Permanent Employees and also to their subsidiary Companies
a Information Technology and Entertainment Software
b Pharmaceuticals cBio Technology
bull These Companies can also acquire overseas companies in their respective areas of business through stock swap as per the guidelines issued by the government
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Conditions for Issue of GDRs contdhellip
bull GDR can be issued in any convertible foreign currency
bull The GDRs and the Shares to be represented by such GDRs will not be offered sold or delivered within the United States or to or for the benefit of US persons as per the United States Securities Act of 1933 as amended (the Securities Act) for a period of 40 days from the date of opening of the Issue
bull The GDRs may not be offered or sold directly or indirectly in the Republic of India (India) or to or for the account or benefit of any resident of India
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Agencies Involved in the GDR Issuebull Lead Manager -The firm should be registered with the
appropriate regulatory authority in Europe Singapore or Japan
bull Depository ndash Is an Overseas Bank authorised by the Issuing Company to Issue the GDRs
bull Listing Agent - Is a person who is responsible for the listing of the GDRs at any of the recognized Overseas Stock Exchanges Generally the Depository also acts as the Listing Agent
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Agencies Involved in the GDR Issue contdhellip
bull Custodian - It is the domestic Bank who holds the underlying shares Bonds Issued against the GDRs
bull Indian Legal Counsel - It is a firm that undertakes the Legal and Financial Due Diligence of the Issuing Companies on behalf of the Lead Manager It also assists the Company in preparation of the Information Memorandum offer document for submitting it with the Overseas Stock Exchange
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Agencies Involved in the GDR Issue contdhellip
bull UK Counsel - An overseas legal person who based on the Due Diligence Report of the Indian Counsel submits its report to the Overseas Stock Exchange They also assist the Lead Manager in preparation of the various documents such as the Deposit Agreement Subscription Agreement and vet the Information Memorandum (IM)
bull Escrow Agent - An Overseas Bank where an Escrow Account has to be opened for deposit of the monies received from Investors against the GDR Issue till the Final Listing Approval is obtained from the Overseas Stock Exchange
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Procedure for Issue of GDRsbull Convene a Board Meeting to approve the proposed GDR
Issue for not exceeding certain value in foreign currencybull Convene the EGM for the approval of the shareholders for
the proposed GDR Issue under Sec 81(1A) of the Companies Act 1956
bull Identify the Agenciesbull Convene a Board Meeting to approve the Agenciesbull Appoint the Agencies and sign the Engagement Lettersbull The Indian Legal Counsel to undertake the Due Diligence
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Procedure for Issue of GDRs contdhellip
bull Prepare the first draft of the IM in consultation with the Indian Legal Counsel and submit the same to various Agencies for their comments thereon
bull Prepare the 2nd3rd draft of IM incorporating the commentsbull The Listing Agent to submit the IM with the overseas Stock
Exchange for their comments and In principle Listing Approval
bull Simultaneously submit draft IM to the Indian Stock Exchanges where the Issuing Companyrsquos shares are listed for In principle approval for listing of the underlying shares
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Procedure for Issue of GDRs contdhellip
bull Hold Board Meeting to approve the Deposit Agreement Subscription Agreement and the Escrow Agreement
bull On receipt of the comments on the IM from the Overseas and Indian Stock Exchanges incorporate the same and file the final IM with Overseas Stock Exchange and obtain Final Listing
bull The Issuing Company can open the Issue for the GDR on receipt of the In principle Listing Approval from the Overseas and the Indian Stock Exchanges
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Procedure for Issue of GDRs contdhellip
bull Open the Escrow Account with the Escrow Agent and execute the Escrow Agreement
bull In consultation with the Lead Manager to finalize - whether the GDR will be through public or a private
placement- the number of GDRs to be issued- the issue price (the Issue price is normally 5-10 discounted prevalent market price of the shares of the Issuing Company one day prior to the opening of the GDR Issue- number of underlying shares to be issued against each GDR
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Procedure for Issue of GDRs contdhellip
bull On the day of the opening of the Issue execute the Deposit and Subscription Agreements
bull The Issue should be kept open for a minimum period of 3 working days
bull Immediately on closing of the Issue convene a Board Committee Meeting for allotment of the underlying shares against the Issue of the GDRs
bull Then Deliver the share certificate to the Domestic Custodian Bank who will in terms of the Agreement instruct the Overseas Depository Bank to Issue the GDR to Non Resident Investor against the shares held by the Domestic Custodian Bank
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Procedure for Issue of GDRs contdhellip
bull On receipt of Listing Approval from Overseas Stock Exchange submit the required documents for Final In principle Listing approval from Indian Stock Exchange
bull After GDRs are listed the Lead Manager to instruct the Escrow Agent to transfer the Funds to the Companyrsquos Account
bull The Company can either remit the entire funds or in part as per its discretion
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Procedure for Issue of GDRs contdhellip
bull On obtaining the Final Approval from Indian Stock Exchanges admit the underlying shares to the depository ie NSDL and CDSL
bull Obtain Trading approval
bull Intimate the Custodian for converting the physical shares into Demat
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Other Reporting Compliances and Issues
bull Within 30 days of the closing of the GDR issue details of the GDR Issue along with the IM should be submitted to
- the Ministry of Finance - the Registrar of Companies- SEBI
bull Return of Allotment in Form 2 is to be filed with ROC within 30 days of Allotment
bull Annexure C is to be filed with RBI Central office within 30 days of closure of the GDR Issue
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Other Reporting Compliances and Issues
bull The Company should furnish quarterly return in Annexure D to the RBI Central office for every calendar quarter
bull The Issue related expenses (covering both fixed expenses like underwriting commissions lead managers charges legal expenses and other reimbursable expenses) shall be subject to a ceiling of 4 in the case of GDR
bull The GDR holders shall not have any voting rights
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Conversion and Transfer of GDRsbull The holder of the GDR can transfersell the GDR in the
Overseas Stock Exchange or request the Depository to cancel the GDR and release the underlying shares to his account
bull On acquiring the shares the GDR holder becomes the member of the Company and he can trade his shares in the Indian Stock Exchanges
bull A registered broker in India may with the permission of the custodian purchase shares of an Indian Company on behalf of a person resident outside India in the recognized Stock Exchange in India and deposit the same with the custodian for the purpose of converting the shares into GDRs
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Conversion and Transfer of GDRs contdhellip
bull the number of shares so purchased shall not exceed GDRs converted into underlying shares and shall be subject to sectoral caps as applicable
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Issuer Depository
At the time of offeringhellip Prepare documentation working
with advisors Interact with listing authority and
respond to all questions IR PR targeted programOngoinghellip Provide depositary and custodian
with notices of dividends rights offerings and other corporate actions including meeting notices
Ongoing compliance with stock exchange and international regulations including disclosure and reporting
Execute internationally-focused investor relations plan
Keeps market informed of developments through PRs
Regular meetings with institutional investors holding company DRs
At the time of offeringhellip Provide advice perspective on
type of program exchange or market on which to list or quote and advise on DR ratio
Appoint custodian Coordinate with all parties for
timely launch Coordinate with legal counsel on
Deposit Agreement and securities law
matters as appropriate Announce DR program to marketOngoinghellip Coordinate with issuer to
announce and process corporate actions such as dividends and shareholdersrsquo meetings
Work with Issuer to maintain active DR program
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
At the time of offeringhellip Prepare (issuer counsel) andor
review (depositary counsel) offering circular and interact with authorities
Prepare draft deposit agreement (depositary bankrsquos counsel)
Submit requisite documents to local regulatory authorities and exchanges (issuer and placement agent counsels)
Ongoinghellip Manage compliance with
securities laws rules and regulations and perfect any securities law exemptions
Provide corporate action support whenever required
Legal Counsel
At the time of offeringhellip Advise on size pricing and
marketing of offering type of program to launch and exchange or market on which to list or quote and ratio of depositary shares to ordinary shares
Act as placement agent or underwriter in offering
Conduct road shows with management introduce issuer to institutional and other investors
Line up selected dealers and co-underwriters
Ongoinghellip Cover issuer through research
reports promote DRs to investors Advise on road shows invest or
meetings investors to target
I-Banks Underwriters
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
At the time of offeringhellip Receive local shares in issuerrsquos
home country and confirm receiptOngoinghellip Hold shares in custody for the
account of depositary Receive and deliver shares in
accordance with depositaryrsquos instructions
Custodian
At the time of offeringhellip Develop long-term plan to raise
awareness of issuerrsquos program in markets in which GDRs will trade
Develop communications plan and information materials for launch activities (road show and presentations to investors launch day promotion meetings with financial media)
Ongoinghellip Coordinate with issuerrsquos
advertising and public relations teams on specific program plans to support and develop company image
Continue to work with the issuer to maintain visibility and invest or knowledge in the capital markets
Arrange regular meetings for issuer with investors to keep them informed of developments results
Investor Relation Firm
At the time of offeringhellip Prepare companyrsquos accounts for
insertion into the prospectus Review prospectus and interact
with authoritiesOngoinghellip Audit and prepare accounts
Accountants
ROLES amp RESPONSIBILITIESROLES amp RESPONSIBILITIES
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Each DR is backed by a specific number of an Issuerrsquos local shares (or a fraction thereof) This is called the DR ratio
The ratio is designed to set the price of each DR in a price range that is competitive with the Issuerrsquos international peer group or the peer group on the exchange on which the DR trades
DRs are most commonly priced between $7 and $20
The ratio of DRs to ordinary shares is usually changed if the GDR price goes well over $20 (eg $50) or if it falls substantially below $7
Changing the ratio allows the Company to keep its DR price in line with its peers and maintain investor interest
Note In case the DR ratio is unity then the depository receipts are also referred to as depository shares
CONCEPT OF DR RATIOCONCEPT OF DR RATIO
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
NYSE listing requirements
The issuer must meet each of the following criteria determined on a worldwide basis
Pre-tax income of $100 million cumulative for the last 3 years
Minimum pre-tax income of $25 million in each of the 2 most recent years
In addition the issuer must meet either of the following two criteria Global market capitalization of $500 million together with
revenues of $100 million for the most recent 12-month period and aggregate cash flow of $100 million for the last 3 years with a minimum of $25 million in each of the 2 preceding years or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
SIZE amp EARNINGS
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Domestic listing standards ndash NYSE
Size and earningsThe issuer must meet one of the following
criteriabull 1048708 Aggregate pre-tax earnings of $10 million
cumulative for the last 3 years with a minimum of $2 million in each of the 2 most recent years or
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Size amp Earnings Continue Not less than $500 million of global market
capitalization together with revenues of $100 million for the most recent 12-month period and aggregate operating cash flow of $25 million for the last 3 years with a positive amount in each year or
Global market capitalization of $750 million together with revenues of $75 million for the most recent fiscal year
In addition the market value of publicly traded shares must equal or exceed $100 million ($60 million for IPOs spin-offs carve-outs)
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Listing fees for the NYSE
Original listing fees Minimum of $150000 to maximum of $250000 based on the number of ADRs outstanding
Annual continuing fees Based on the number of ADRs outstanding subject to a minimum of $38000
The total fees that can be billed to an issuer in any calendar year are capped at $500000
These fees apply to both US and foreign listed companies
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
NASDAQ
NASDAQ National Market bull Size amp Earnings bull The issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $15 million together
with pre-tax income from continuing operations of at least $1 million in latest fiscal year or in two of the last three years and public float having a market value of $8 million or
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Size amp Earnings Continue
2 Stockholdersrsquo equity of at least $30 million together with public float having a market value of $18 million or
3 Public float having a market value of $20 million together with either (i) listed securities having a market value of $75 million or (ii) $75 million in total assets and $75 million in total revenues
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Listing Fees
bull Original listing fees for ADR issuers range from $100000 to $150000 based on the number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $21225 to $30000 depending on the number of ADRs issued and outstanding
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
NASDAQ Capital Markets
Size and earningsThe issuer must meet one of the following 3
alternative criteria1 Stockholdersrsquo equity of at least $5 million or2 $50 million in market value of listed securities
or3 $750000 in net income from continuing
operations in latest fiscal year or in two of the last three fiscal years
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Listing Fees
bull Original listing fees for ADR issuers range from $25000 to $50000 depending on the total number of ADRs issued and outstanding
bull Annual continuing fees for ADR issuers range from $17500 to $21000 depending on the total number of ADRs issued and outstanding
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
bull Transferability of the Underlying Shares amp GDRs The shares underlying the GDRs as well as GDRs itself must be freely transferable fully paid and free from any liens amp restrictions on transfer
bull Free float requirement 25 of the GDRs must be in public hands This 25 should not include any investor taking more than 5
bull Admission to trading on a Recognized Stock Exchange
bull Market capitalization The expected aggregate market value of all GDRs to be listed must be at least pound700000 The FSA may modify this rule to admit shares of a lower value if it is satisfied there will be an adequate market for the securities concerned
bull Continuing obligations Various ongoing obligations on the part of issuing company include
bull Publication of an annual financial report within four months of its year end
bull Publication of price sensitive information to enable investors to trade in a knowledgeable manner
These are specifically applicable to companies seeking to list its GDRs on LSE
GDR LISTING REQUIREMENTSGDR LISTING REQUIREMENTS
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
A prospectus is the companyrsquos information and sales document which enables market
participants to create opinions and decide whether to participate in the offering
A DR prospectus must include the necessary information that enables investors to make an
informed assessment of
the assets and liabilities financial position profits and losses and prospects of the Company and
the rights attached to the DRs
An operating and financial review audited financial information for the last three financial
years or such shorter period as the Company has been in operation In case the prospectus is
more than nine months after the end of last financial year unaudited half year accounts will
also be included
The prospectus also requires details of any material contracts
Prospectus should also include a summary describing the Company that includes any risks
associated with investing in the Company
CONTENTS OF PROSPECTUSCONTENTS OF PROSPECTUS
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
COMPANY ADR GDR Bajaj Auto No YesDr Reddys Yes YesHDFC Bank Yes YesHindalco No YesICICI Bank Yes YesInfosys Technologies Yes YesITC No YesL amp T No YesMTNL Yes YesPatni Computers Yes NoRanbaxy Laboratories No YesTata Motors Yes NoState Bank of India No YesVSNL Yes YesWIPRO Yes Yes
Indian Companies using ADRGDR
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Why do Indian Corsquos opt for GDR
Through an ADR companies can only tap the American markets while GDRs give the companies more flexibility in terms of markets
European markets are more liberal than the American markets
Companies get more flexibility in terms of currencies as well
Companies here want to capitalise on foreign investor interest as much as possible
The need of Indian corporates for funds is so huge and with debt being very expensive
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
IDRIndian Depository Receipts (IDRs) the Indian counterparts of ADRs or GDRs were introduced in 2004 stipulated in the Companies (Issue of Indian Depository Receipts) Rules 2004 IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company
In the year 2000 Section 605 A of the Companies Act 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Offer of Indian Depository ReceiptsNot withstanding anything contained in any other law for the time being in force the Central Government may make rules applicable for-
(a) the offer of Indian Depository Receipts
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts
(c) the manner in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters
(d) the manner of sale transfer or transmission of Indian Depository Receipts by a company incorporated or to be incorporated outside India whether the company has or has not been established or will not establish any place of business in India
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
The second step was taken in 2004 when the Indian Depository Receipt rules were framedFinally SEBI has taken the third step on April 3rd 2006 in the back drop of the Indian stock exchanges boom by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares
Issuers Eligibility CriteriaMust have an average turn over of US$ 500 million during the previous 3 financial yearsMust have capital and free reserves which must aggregate to atleast US$100 millionMust be making a profit for the previous 5 years and must have declared a dividend of 10 in each such yearThe pre issue debt-equity ratio must be not more than 21Must be listed in its home countryMust not be prohibited by any regulatory body to issue securitiesMust have a good track record with compliance with securities market regulationsMust comply with any additional criteria set by SEBI
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Who can InvestIndian CompaniesQualified Institutional BuyersNRIrsquos and FIIrsquos with permission of the Reserve Bank Of IndiaThe IssueThe minimum issue size is Rs 50 crores90 of the issue must be subscribedAutomatic fungibility is not permittedThe following conditions would also applyIn one financial year the market cap cannot exceed 15 of the paid up capital and free reserves of the issuerRedemption into underlying shares is prohibited for 1 year beginning the issue dateRepatriation of proceeds is subject to Indian foreign exchange laws prevailing at time of repatriationThe issue must be in rupeesThe issuer is subject to Clause 49 of the listing agreement
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Rights of IDR holders An IDR holder will be entitled to rights on an equitable
basis vis-agrave-vis the rights of shareholders of the issuer company in its home country
Some of the rights of the IDR holders include minus Voting minus Entitlement to bonus issues minus Entitlement to dividends minus Participation in rights issues minus Participation in sub-divisions and consolidations of
underlying equity shares minus Participation in other distributions and corporate actions
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Listing amp trading Listed on the Stock Exchanges Allotted to investors in demat form Will be traded in demat form The trading and settlement process of IDRs is like that of equity
shares of Indian companies Can convert IDRs into underlying equity shares only after 1 year
and with the prior approval of the RBI Upon such conversion resident individual investors are allowed
to hold the underlying equity shares only for the purpose of sale within a period of 30 days from the said conversion
Conversion of equity shares into IDRs is not permitted under current regulations ie reverse fungibility is not allowed
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
How does ADRGDR work bull Let us take Patni example ndash trades on the Indian stock at
around Rs460-bull This is equivalent to US$ 10 ndash assume for simplicity bull Now a US bank purchases 10000 shares of Patni and issues
them in US in the ratio of 101bull This means 1 ADR purchased is worth 10 Patni shares bull Quick calculation means 1 ADR = US $100bull Once ADR are priced and sold its subsequent price is
determined by supply and demand factors like any ordinary shares
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
In Simple terms - ADR GDR ISSUE
COMPANY SHARE
DEPOSITARY BANK
INVESTOR
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
DR Issuance ProcessDR Issuance Process
US Broker
Depository(JP Morgan NY)
India Broker
Local Custodian(JP Morgan Mumbai)
US Investor
17
2
3
4
5
6 SENSEX
Investor contacts broker and requests the purchase of shares of a DR issuer company If existing DRs of that company are not available the issuance process begins
To issue new DRs the broker contacts a local broker in the issuerrsquos home market
The local broker purchases ordinary shares on an exchange in the local market
Ordinary shares are deposited with a local custodian
The local custodian instructs the depositary to issue DRs that represent the shares received
The depositary issues DRs and delivers them in physical form or book entry form
The broker delivers DRs to the investor or credits the investorrsquos account
1
2
3
4
5
6
7
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
DR Cancellation ProcessDR Cancellation Process
DR Broker
Local Broker
Depository(JP Morgan NY)
Local Custodian(JP Morgan Mum)
US Investor
2
3
4
The investor instructs the broker to cancel DRs
The broker delivers the DRs to the depositary for cancellation
The depositary cancels the DRs and instructs the local custodian to release and deliver the underlying shares to the sellerrsquos broker in the issuerrsquos home market
The local custodian delivers the underlying ordinary shares as instructed to the local broker The local broker safe keeps the ordinary shares or delivers them to or on behalf of the new investor
1
2
3
4
1
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Standard Chartered PLC IDR issuebullThe issue opened for subscription by investors on May 25 2010 and closed on May 28 2010bull subscribed 220 timesbullThe company came out with 240000000 INDIAN DEPOSITORY RECEIPTS (including Anchor investor portion of 36000000 IDRs) at a price range of Rs 100 to Rs 115 through 100 Book Building processbullThe issue received total bids for 449705000 IDRs against the offer of 204000000 IDRs resulting in a subscription of 220 times The issue has received bids for 14507200 IDRs at cut-off pricebullUBS Securities India Private Limited and Goldman Sachs (India) Securities Private Limited were the Global Coordinators and Book Running Lead Managers to the IDR issuebullJM Financial Consultants Private Limited DSP Merrill Lynch Limited Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are the Book Running Lead Managers to the issuebullStandard Chartered STCI Capital Markets Limited is the Co-Book Running Lead Manager to the issuebullJM Financial Services Private Limited Kotak Securities Limited SBICAP Securities Limited and ICICI Securities Limited are the Syndicate Members to the issuebullKarvy Computershare Private Limited is the registar to the companybullThe market lot is 200 IDRs and the Minimum Order Quantity is 200 IDRs The Maximum Subscription Amount for Retail Investor was Rs100000
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
The details of the Issue Subscription are given below
Category Shares offered
Shares Bid
Subscription ratio
QIB 84000000 348394400 41476
NII 43200000 82150400 19016
Retail 72000000 18210200 02529
Employee 4800000 950000 01979
Total 204000000
449705000
220
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Major Countrywide ADR-GDR Issues
CLICK HERE TO SEE INDIAN DRrsquoS LIST
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Amount of Capital Raised ( In Billion USD)Countrywide
CLICK HERE TO SEE LIST OF INDIAN COMPANIES CAPITAL RAISED
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Performance of Indian ADRsGDRs Instanex Skindia Index
Like any index measures the performance of any stock market Instanex Skindia GDR index measures the performance of Indian ADRGDR The base of the Skindia GDR Index is April 15 1994 with the index set consisting of 21 actively traded GDRs and ADRs The Index a market value weighted index (total number of GDRs issued multiplied by GDR price) is one of the most popular GDR Indices
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
Company CMP(US$) PE Chg(US$) Chg()Dr Reddys (A) 3870 5885 011 03
GAIL (G) 3235 1773 109 35
Grasim Industries (G) 4422 1303 213 50
ICICI Bank (A) 3211 2802 093 30
Infosys Tech (A) 4915 2898 025 05
Instanex Skindia DR Index 207779 2381 4138 20
ITC (G) 548 3558 [001] [01]
L amp T (G) 1335 1246 067 53
Mahindra amp Mah (G) 1388 1671 047 35
Ranbaxy Labs (G) 585 -2371 029 52
Reliance (G) 2755 1873 110 42
Satyam Computers (A) 264 460 000 00
State Bank of India (G) 5400 1052 144 27
Sterlite Industries (A) 622 5455 000 00
Tata Communications (A) 450 929 000 00
Tata Motors (A) 2801 5273 071 26
Global Depositary Receipt (GDR) Stock Prices
This list gives you a Current Market Price (US $) PE Change (US $) and Change
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
THANK YOU
- Depositary Receipts
- Depositary
- Depositary Receipt
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- AMERICAN DEPOSITORY RECEIPTS
- Levels of ADR
- Slide 10
- What is a GDR
- Eligibility for Issue of GDRs
- DIFFERNCE BETWEEN ADR amp GDR
- ADVANTAGES OF ADRGDR
- Benefits to the Company
- Company Benefits (contrsquod)
- Benefits to the Investor
- Investor Benefits (contrsquod)
- Investor Benefits (contrsquod) (2)
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs
- Conditions for Issue of GDRs (2)
- Conditions for Issue of GDRs (3)
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue
- Agencies Involved in the GDR Issue (2)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (2)
- Procedure for Issue of GDRs (3)
- Procedure for Issue of GDRs
- Procedure for Issue of GDRs (4)
- Procedure for Issue of GDRs (5)
- Other Reporting Compliances and Issues
- Other Reporting Compliances and Issues
- Conversion and Transfer of GDRs
- Conversion and Transfer of GDRs
- Slide 38
- Slide 39
- Slide 40
- Slide 41
- NYSE listing requirements
- Domestic listing standards ndash NYSE
- Size amp Earnings Continue
- Listing fees for the NYSE
- NASDAQ
- Size amp Earnings Continue (2)
- Listing Fees
- NASDAQ Capital Markets
- Listing Fees (2)
- Slide 51
- Slide 52
- Indian Companies using ADRGDR
- Why do Indian Corsquos opt for GDR
- IDR
- Slide 56
- Slide 57
- Slide 58
- Rights of IDR holders
- Listing amp trading
- How does ADRGDR work
- In Simple terms - ADR GDR ISSUE
- Slide 63
- Slide 64
- Standard Chartered PLC IDR issue
- The details of the Issue Subscription are given below
- Major Countrywide ADR-GDR Issues
- Amount of Capital Raised ( In Billion USD) Countrywide
- Performance of Indian ADRsGDRs Instanex Skindia Index
- Slide 70
- THANK YOU
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