Foreign Fund Raising Modes in India

FOREIGN FUND RAISING MODES IN INDIA

Purpose of use – Used by Indian Co. to raise equity capital in international market.

Benefit – No ceiling / limits on investment raised or on number of GDR/ADR/FCCB to

Be floated by company or group of companies in a financial year.

Procedure – Prior Government approval.

Eligibility requirements – record of consistent good performance (financial or

Otherwise) for minimum 3 years. There is relaxation in case of infrastructure

Projects such as power generation, telecommunication, petroleum exploration and

Refining, ports, airports and roads.

Depositary receipts

A depositary receipt (DR) is a type of negotiable financial security that is traded on a local stock exchange, usually in the form of equity that is issued by a foreign publicly listed company. The DR, which is a physical certificate, allows investors to hold shares in equity of other countries. The DR is created when a foreign company wishes to list its already publicly traded shares or debt securities on a foreign stock exchange. Before it can be listed to a particular stock exchange, the company will first have to meet certain requirements put forth by the exchange. Initial public offerings, however, can also issue a DR. DRs can be traded publicly or over-the- counter.

Origin of Depository Receipts

It started in 1920's in USA. In this period, it was difficult and risky to invest on the originals of foreign securities by American investors and brokers. The risks in this condition have been causing delays and some kind of extra expenses. In order to avoid the practical problems, they should have looked for solutions. In the solution produced, it was aimed at constituting a system that will be able to eliminate those handicaps. In those