The Hindu Business Line : JPMorgan Chase sees lot of companies tapping DR route

Mr Kenneth K.L. Tse (right), Managing Director, Asia Pacific Head of Depositary Receipts, JP Morgon, and Mr Shaun Parkes, Managing Director, Global Head of Depositary Receipt Sales, addressing a press meet in Mumbai on Wednesday. —

Our Bureau

Mumbai, April 2 JPMorgan Chase is bullish on Indian companies opting for Depository Receipts (DR) to raise capital from the overseas market. The backdrop is the record of over $7 billion raised through DRs in 2007 by Indian companies, against $3.8 billion in 2006.

Despite substantial capital being raised through Qualified Institutional Placements, DRs have become important in the context of the recent credit crisis in the global market, JPMorgan officials said.

“The Indian Government has very stringent norms for External Commercial Borrowings,” said Mr Bharat K. Reddy, Executive Director and Chief Representative of JP Morgan India, at a news briefing here on Wednesday.

With respect to FCCBs, too, the current credit contagion in the global markets makes it difficult to separate credit risk from equity risk, and that instrument has also gone down in popularity, he said.

“If you want to raise money today you have to sell plain vanilla equity and one of the methods to do that is DRs,” he said.

India launched the most number of DRs in 2007, totalling 28, out of which 20 companies launched fresh DRs. China had same number of listings, but the amount of money raised was higher ($10.7 billion, against India’s $7.3 billion).

Among the 20 companies that raised $3.2 billion was the ADR issue of Sterlite Industries that raised $2 billion. Other top DR issues of 2007 were of Indiabulls Real Estate ($417 million), Gitanjali Gems ($180.6 million), Financial Technologies ($115million) and IndusInd Bank ($33.8 million). ICICI Bank too raised around $2.5 billion through a follow on offer in the US market.

This year five Indian companies have completed their new listings through DRs. Talking about wider listing options for GDRs, Mr Reddy said: “A lot of other exchanges are getting involved in listing GDRs like those in Singapore, Dubai, and Hong Kong, besides the traditional London and Luxembourg stock exchanges.”

“With the commodities boom you will see a lot of interest from petrochemicals, cement, iron and steel, and the exploration and production business,” Mr Reddy said.

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