Depositary
Receipts
Integration
of capital markets of the world began two decades ago and has accelerated
dramatically over the past few years. Depositary Receipts are an important
element in the process of market integration and have become very popular
with issuers over the years. They permit investors to acquire and trade
in foreign securities and give the issuing company access to major international
markets.
In the 1990's,
the compounded annual growth rate of Depositary Receipt trading and dollar
trading volume globally has been 30% and 22% respectively. In addition,
an estimated 1.50 billion Depositary Receipt's valued at $20-25 billion
are traded on an average in the Over-The-Counter Exchange and European
markets every year.
India's
Depositary Receipt program
India has
the distinction of having the largest number of GDR issues (Rule 144A/Reg
S) by any country. The first issue was by Reliance Industries ($ 150 mill)
in May 1992. Since then, the depositary receipt concept developed considerably
in India with a total of 60 Indian companies raising over US$ 6.5 billion.
Origins
of the Skindia GDR Index
Indian GDRs
traded on international bourses are governed by parameters specific to
the market in which they are traded, making their prices unique. To capture
their movement and performance, it is necessary to develop reliable market
indicators which can be used as a tool by investors for measuring their
portfolio returns vis-à-vis market returns. In response to this
need, Skindia Finance pioneered a GDR index which became popularly
known as the 'Skindia GDR Index'.
The base of
the Skindia GDR Index is April 15, 1994 with the index set consisting of
22 actively traded GDRs. The Index, a market value weighted index (total
number of GDRs issued multiplied by GDR price), is one of the most popular
GDR Indices worldwide. It is used as a standard at the Institute of International
Finance (IIF) in Washington and is quoted in all the leading newspapers
such as Times of India, Business Standard, Economic Times, Financial Express,
Observor, Indian Express, India Inc (New Jersey, US), etc. It also appears
daily on the Bloomberg, Knight Ridder, Press Trust of India (PTI) and DART.
The Skindia
GDR Index was first modified in April 1995. It was not reviewed in the
subsequent year as few companies had tapped the GDR market. However, economic
reforms and liberalisation of the financial sector have brought momentous
changes to the capital markets, making it necessary to construct an index
which is in tune with these changes. The new Skindia GDR index was constructed
after carefully studying various other indices, consulting many experts
in the field and our own in-house research.
