DR News: Indian GDRs Suffered In 2010


By Gordon Platt

Investors lost money in 85% of the 40 global depositary receipts (GDRs) issued by Indian companies in 2010, according to an analysis by Crisil Research, a credit rating firm majority-owned by Standard & Poor’s.

Four out of five Indian GDRs issued last year produced a negative return of 35% or more through September 15, 2011. The average return on investments by all of the Indian GDRs issued in 2010 was a negative 52%.

According to Crisil Research, the underperformance was significant when compared with the average return of negative 7% in the same period by the S&P; CNX 500, a broad-based index of companies listed on the National Stock Exchange of India.

Indian companies account for approximately 68% of the total listed GDRs on the Luxembourg Stock Exchange. Last year Indian companies, mainly small and mid-size, raised about $1.2 billion through GDRs.

“Companies generally prefer the GDR route for fundraising when the global sentiment for emerging markets is strong,” says Tarun Bhatia, director of capital markets at Crisil Research. “During 2010 many Indian companies were able to attract foreign investors through GDRs, given the performance of equity markets and [India’s] strong domestic growth rate of over 8%.”

The number of Indian GDRs issued in 2011 has slowed significantly, with only 12 companies issuing $200 million through GDRs in the first nine months, compared with 34 companies issuing $1 billion of GDRs in the same period a year earlier.