The JPMorgan Chase has recently announced that it is confident about the Indian companies that are opting for the Depository Receipts (DR) to raise capital from the overseas market. The company officials have stated that the reason behind this confidence is the record of over $7 billion raised through DRs by Indian companies, in the year of 2007, against $3.8 billion in 2006. The officials added that the DRs have become important in the context of the recent credit crisis in the global market, in spite of the substantial capital being raised through the Qualified Institutional Placements.
Commenting on the issue, the Executive Director and Chief Representative of JP Morgan India, Mr. Bharat K. Reddy said on Wednesday, "The Indian Government has very stringent norms for External Commercial Borrowings". He said that the current credit contagion in the global markets is making it difficult to separate credit risk from equity risk, with respect to the FCCBS too and the popularity of that instrument has also gone down. In his words, "If you want to raise money today you have to sell plain vanilla equity and one of the methods to do that is DRs".
The industry sources have stated that India did launch the most number of DRs in the year of 2007, a total of 28 and a number of 20 companies out of those launched fresh DRs. The sources added that the ADR issue of Sterlite Industries was included among the 20 companies that raised an amount of $3.2 billion. That issue alone raised a huge amount of $2 billion and the other top DR issues of 2007 were inclusive of the Indiabulls Real Estate ($417 million), Gitanjali Gems ($180.6 million), Financial Technologies ($115million) and the IndusInd Bank ($33.8 million). The major private lender, ICICI Bank also raised around $2.5 billion through a follow on offer in the US market.
According to the sources, the Indian companies have already completed their new listings through DRs in this year and while commenting on the wider listing options for GDRs, Mr. Reddy said, "A lot of other exchanges are getting involved in listing GDRs like those in Singapore, Dubai, and Hong Kong, besides the traditional London and Luxembourg stock exchanges". He added, "With the commodities boom you will see a lot of interest from petrochemicals, cement, iron and steel, and the exploration and production business".
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| Posted : 4/4/2008 |
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