Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: ACCOUNTING STANDARDS :: cpt :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd :: list of goods taxed at 4% :: TDS :: VAT Audit :: articles on VAT and GST in India :: due date for vat payment :: VAT RATES :: empanelment :: ARTICLES ON INPUT TAX CREDIT IN VAT
« General »
 Tax and the dilemma of the self-employed
 Banks warn share tax hike threatens Paris' post-Brexit appeal
 PMC may decide on property tax rebate for IT firms this week
 I-T Dept is giving out certificates of appreciation. Have you received yours?
 Government works on ironing out benefits refund mechanism for exportersa
  Tax officials are using an IDS provision to question transactions beyond six-year-limit
 Tax-free bonds rally like midcap funds
 Senior citizens do not have to pay advance tax on salary and interest income
 GST: Audit commissioners to get adjudication powers
 Interest on NRE rupee account can be exempt from tax under FEMA
 Impact of GST on Real Estate Sector

Investors lose money in 85% of GDRs
September, 28th 2011

Information technology, consumer durables and media companies were major underperformers.

Less than a week after the Securities and Exchange Board of India (Sebi) banned seven companies and some entities for manipulating share prices using global depository receipts (GDRs), a study has revealed that investors have lost money in 85 per cent of such issues abroad.

"An analysis of 40 GDRs issued by Indian companies in 2010 reveals that investors have lost money in 85 per cent, with four out of five issues giving a negative return of 35 per cent or more," said the Crisil study. As on September 15, the average return on investments (a measurement of the difference in the offer price and the market price) by all the GDRs issued in 2010 was a negative 52 per cent, it added.

The underperformance of GDRs is significant when compared to the average return of a negative seven per cent by the S&P CNX 500 during the same period. Information technology, media and consumer staples companies were the major underperformers. A GDR is an instrument that is listed on an exchange outside the home country of the issuer and denotes a fixed number of a company's shares as the underlying product. Once listed, it can also be converted into equity shares of the issuing company.

Interestingly, Indian companies have been the most active GDR issuers, accounting for nearly 68 per cent of all listed GDRs on the Luxembourg Stock Exchange as of December 2010. During 2010, Indian companies, predominantly small and mid-cap ones, raised around $1.2 billion through the GDR route, according to Crisil.

Companies generally prefer the GDR route for fund raising when the global sentiment for emerging markets is strong, said Tarun Bhatia, director-capital markets, Crisil Research.

During 2010, many Indian companies were able to attract foreign investors through the GDR route, given the performance of equity markets and the strong domestic growth rate of a little over eight per cent. Further, lower disclosure norms on end-use of funds make fund raising through GDRs easier for domestic companies, he added.

In absolute terms, according to the study, the market value of the funds mobilised through GDRs has eroded by approximately 47 per cent (difference between capital mobilised and its current market value) to $0.6 billion, with most GDRs trading 40-60 per cent below their offer price. In percentage terms, Teledata Technology Solutions' GDR is the worst performer, with its price on September 15 trading 93 per cent below the offer price.

Oher entities that have seen the price erode significantly include Ashco Niulab Industries (down 81 per cent), BAG Films and Media (down 73 per cent), Birla Power Solutions (down 74 per cent), Cox and Kings (down 25 per cent), Shree Ashtavinayak Cine Vision (down 51 per cent), Nissan Copper (down 45 per cent) and FCS Software Solutions (down 83 per cent).

On the other hand, Rainbow Papers' issue has been the best performer, with its price trading 148 per cent higher than the offer price.

Meanwhile, the number of GDRs issued in 2011 has slowed. Only 12 Indian companies have raised money, a total of $0.2 bn through GDRs during 2011, as compared to 34 companies that raised $1 bn during the corresponding period in 2010. "Volatility and weak performance of Indian equity markets in 2011 have damped investor sentiments. This, coupled with the weak performance of the past GDRs, has made them less attractive to foreign investors," says Chetan Majithia, head, Crisil Research.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Contact Us

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions