Emerging Markets: DR News

Companies Based In India Increase DR Offerings

By Gordon Platt

Equity issues by India-based companies using depositary receipts rose from $100 million in 2008 to $3.4 billion last year. The rush of DR issues is likely to continue in 2010, although some Indian companies are showing a preference for rupee-based financing because of the volatile dollar.

An easing of rules for qualified institutional placements (QIPs) last year highlighted the ease and flexibility of the private placement route. QIPs are providing competition to DRs because a company can get approval from its board to issue a larger amount of equity and tap the market quickly in smaller pieces as needed. Nevertheless, DR offerings remain popular as foreign investors seek exposure to India’s stock markets, which had their biggest rally in 18 years in 2009, with a rise of more than 80%. Foreign fund flows to India’s markets rose to $17.5 billion in 2009, nearing the $17.7 billion record of two years earlier.

Sterling International Enterprises, a Mumbai-based information technology company that also provides equipment-leasing services, raised $175 million in December 2009 using global depositary receipts. The company selected BNY Mellon as the depositary bank for its sponsored GDR program.

Among major Indian companies that issued DRs last year were Sterlite Industries, Tata Motors, Tata Steel, Tata Power, Suzlon Energy, Axis Bank and Dish TV. The Securities and Exchange Board of India last September set DRs with voting rights on an equal footing with domestic shares in takeover situations, making an open offer mandatory if a 15% stake is bought.