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K.S. Badri Narayanan

HDFC Bank star performer; Sify, Patni big losers

Chennai , Dec 29

The performance of Indian American depository receipts (ADRs) almost mimicked the underlying equities in 2006.

However, the domestic markets as a whole outpaced the US bourses by a big margin.

The average return generated by the Indian ADRs stood marginally higher at 32.5 per cent against 31 per cent posted by their Indian equities.

However, domestic benchmarks - the BSE Sensex and the NSE's S&P CNX Nifty - produced sharp returns of 49 per cent and 42 per cent respectively.

In comparison, the Dow Jones Industrial Average returned close to 17 per cent, the tech-focused Nasdaq 10 per cent and the broader S&P-500 14 per cent.

HDFC Bank was the star performer among the ADRs, returning 69 per cent, followed by Dr Reddy's (68.6 per cent) and ICICI Bank (46 per cent).

Sify was the biggest loser by 13.5 per cent followed by Patni Computer.

Meanwhile, Dr Reddy's came out with an additional 18-lakh ADR issue to the underwriters at $16 a share.

Among the tech companies, Infosys (36 per cent) and Wipro (35.8 per cent) topped the return chart while Patni Computer produced a negative return of 12.3 per cent.

HDFC Bank's ADR outperformed its underlying equity, which returned close to 50 per cent against 69 per cent for the ADR.

ICICI Bank's ADR under-performed against its underlying equity, which produced 53 per cent return.

Infosys in Nasdaq 100

The Infosys ADR was the other under-performer vis-à-vis its underlying stock, which returned 50 per cent.

This was due to the floatation of the sponsored $1.6-billion ADR issue of 30 million ADRs in November.

Interestingly, the company fixed the ADR issue price in discount (by 3.2 per cent) to the then prevailing rate.

Infosys came out with this issue to achieve its ambition of becoming the first Indian company to enter the Nasdaq 100 Index.

It also came out with a bonus issue in the ratio of 1:1 during this year, apart from higher dividends.

If these are also factored in, Infosys may well be the top performer among the Indian ADRs.

Apart from Infosys, Satyam Computer also came out with 1:1 bonus issue.

Premium/Discount

With the launch of the sponsored ADR issue, the premium of the Infosys ADR dipped sharply; it currently rules around 8.5 per cent against 21.5 per cent at the start of 2006.

Strong showing by the HDFC Bank ADR also resulted in losing premium to 3.3 per cent (10.4 per cent).

On the other hand, ICICI Bank saw premium almost doubling to 41.3 per cent (21.15 per cent).

For the rest, the change in premium/discount was marginal.

The year also marked the entry of the Mumbai-based WNS (Holdings) Ltd, a provider of offshore BPO services, into the ADR space. The company raised $224 million by issuing 11 million ADRs in July at $20 each; it currently hovers around $31.

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