'Depositories best way to raise money abroad now'
With the ECB and FCCB issues slowing down due to stringent government norms, plain vanilla equity issues through the depositary issue route remains the best option for Indian companies, reports MC Vaijayanthi.Updated: Apr 02, 2008 21:48 IST
With the external commercial borrowing (ECB) and foreign currency convertible bonds (FCCB) issues slowing down due to stringent government norms, plain vanilla equity issues through the depositary issue route remains the best option for Indian companies to raise money abroad said Bharat Reddy, chief representative of JP Morgan in India. He said JP Morgan at present is pursuing three to four potential depositary receipts issues, without naming the companies. "The timing of the issue would depend on the market conditions," Reddy said.
Commodity and infrastructure companies and also biotechnology companies and civil aviation companies are looking to raise money said Reddy. Dubai and Singapore bourses opening up for depositary receipts market has created new avenues for DR issuers as these exchanges come with their own strong set of core investors.
The year 2007 has been phenomenal for DR as liquidity was abundant with trading volumes jumping by 55 per cent and trading value by 92 per cent. "In 2007 Indian companies ventured out to do global M&As and they can use DRs as acquisition currency," said Kenneth Tse, Asia Pacific head of Depositary Receipts at JP Morgan.
DR issuers preferred to look at London Stock Exchange and Luxembourg as United States imposed strict regulations through its Sarbanes-Oxley Act. The Hong Kong and Japanese markets are also looking at DR listings said Tse. New regulations had made listing costly and cumbersome for foreign companies in the US market and regulators there are looking at reviewing them, he added.