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The US-based OTC Markets Group Inc wants Indian companies to tap the level-1 American Depository Receipts (ADR) opportunity that could soon come their way.
To spread awareness about level-1 ADRs and attract Indian companies to its marketplace in the US, OTC Markets Group Inc Managing Director Jason Paltrowitz is meeting top policymakers besides chief executives of Indian companies.
Currently, there are 2,000 ADR programmes (from 80 countries) listed in the OTC Markets Group platforms.
As much as 75 per cent of all ADRs are level-1.
India is on course to remove a restriction that barred domestic companies from undertaking a secondary listing in markets abroad.
Inexpensive route A level-1 ADR programme is seen as a relatively inexpensive way for companies to access US investors who prefer to invest in Indian companies through dollar-denominated securities and without taking any foreign exchange risk.
Currently, Indian laws only allow listing abroad through an initial public offering with issuance of new shares.
This stance could change if the BJP Government were to accept recommendations of the Sahoo panel, which reviewed the depository receipts scheme formulated in the mid-Nineties.
The Sahoo panel recommended that the restriction on secondary listing be lifted and also non-capital raising OTC depository receipts be allowed to be created and traded for Indian companies in markets abroad.
New avenue This would open a new avenue for Indian companies — especially unlisted ones — to attain visibility and gain access to US investors who do not want to directly come to India to invest in Indian companies.
“There is good demand among US investors for access to Indian companies through the ADR mechanism,” Jason Paltrowitz, Managing Director and Global Head of Business Development, OTC Markets Group, told BusinessLine .
Paltrowitz, who met senior Finance Ministry officials in North Block, said he was visiting India to spread awareness about level-1 ADR and OTC Markets Group as a marketplace among policymakers and Indian companies.
“When you talk to an Indian company about OTC, they get worried.
Expresses confidence “Traditionally when foreigners think about OTC, there is lot of negative connotation. But the US OTC market is very different, SEC regulated and electronic traded. We are not a phone market, but we are very much regulated, open and transparent. This is what I have conveyed to the Finance Ministry officials in this visit and provided them comfort about our marketplace.”
Paltrowitz, who met several Indian companies in a conference in Jaipur on Friday, seemed confident that India would in the coming weeks operationalise the Sahoo panel report and enable Indian companies to create level-1 ADRs. The main differentiator between a listing on the New York Stock Exchange and the OTC Markets Group is that the latter would not require the Indian issuer to adopt US Generally Accepted Accounting Principles or be Sarbanes-Oxley compliant.
The cost of listing will be lower in the OTC market with lesser compliance burden.
“We are excited as more companies can come to our marketplace, once Indian authorities give their approval,” Paltrowitz said.
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