Posted September 13, 2015 5:40 pm by Comments

The Asset has recently noted that over the last several months, high-profile Indian companies such as Bharti Airtel and YES Bank have announced plans to raise ADRs (American Depositary Receipts) capital. In fact, YES Bank, India’s fourth largest private sector bank, hopes to raise US$1 billion from ADRs.

Indian companies have been primarily using ADRs as a capital raising tool. However, Aashish Mishra, head of securities services markets and securities services at Citi India, sees this trend slowly shifting following a decision late last year by the Indian Ministry of Finance’s Sahoo committee to allow sponsored/unsponsored level 1 ADRs (non-capital raising) programs for India companies. Mishra was quoted by The Asset as saying:

“Level 3 ADR is capital raising and level 1 ADR is non-capital raising so it’s a completely secondary market programme. If this goes live then it would allow US investors to trade a number of Indian stocks in the secondary market via the ADR route.”

Unsponsored level 1 ADRs programs are established by a foreign depository bank without the involvement of the company whose shares underlie the ADR. Unlike previous level 3 ADRs programs, level 1 ADRs are actively traded in the US OTC (over-the-counter) markets tapping into the broker-dealer network.

This will allow Indian companies to more easily diversify their investor base in a non-capital raising fashion for the first time while foreign investors that couldn’t access the Indian stock market due to mandate constraints can now approach their broker to purchase these shares and in return have a DR issued against them by depository banks.

Currently, there are twelve Indian ADRs trading on major US stock exchanges plus a few others that trade on the OTC.

To read the whole article, India giving foreign investors more investment options through ADRs, go to the website of The Asset. In addition, check out our India ADRs list, India Closed-End Funds list and India ETFs list pages.

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