This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

India Needs To Review Its Depositary Receipt Regulations To Remain A Top Investment Destination, Says BNY Mellon Report

Stocks in this article: BK

MUMBAI, India, March 13, 2013 /PRNewswire/ -- India's drive to lure investors from overseas received a boost in 2012 with the adoption of the Qualified Foreign Investor initiative, but to remain one of the world's top investment destinations the nation should review its depositary receipt (DR) regulations, says BNY Mellon in its new report, ' India: Easing Conditions for Investors'.

India's first depositary receipt programme for Reliance Industries was established in 1992. Since then, only 13 Indian corporate have established American Depositary Receipt programmes. As a result, consensus is growing amongst the global investment community that India needs to consider re-evaluating its DR rules to stay abreast of evolving markets.

Gregory Roath, BNY Mellon's Asia-Pacific head of depositary receipts, said: "We are often asked, especially by U.S. investors, to establish ADR programmes for Indian companies but are restricted from doing so by current regulations. There is significant international demand for Indian equity in the form of DRs that simply cannot be satisfied via the routes now available. Many investors prefer the familiarity and convenience of DRs, are unable to invest directly, or are unable or unwilling to use derivatives."

A review of public filings in 2012 shows that nearly half of all global funds that invest in India using depositary receipts choose not to invest directly through ordinary or local shares.

BNY Mellon believes introducing over-the-counter (OTC) non-capital-raising ADR programmes for Indian companies could solve this challenge. It met recently with the Ministry of Finance, SEBI, and the Reserve Bank of India to discuss the merits of this proposal and how it might benefit India and Indian corporates. In permitting OTC non-capital-raising DRs, India would join 67 other countries that provide investors with access in this way, including Brazil, South Korea, South Africa and Turkey.

Commenting on BNY Mellon's report, Cynthia Tusan, CFA, President of Strategic Global Advisors, LLC, which has $440 million in international equity assets under management, notes: "We are very interested in any new ADRs available for companies based in India.  We invest in India but generally, we can only access that market through ADRs since most of the accounts we manage, even the institutional accounts over $25 million do not have custody capability in India.  We find the number of ADRs available for India to be extremely limited."

Neil Atkinson, head of BNY Mellon's Indian Depositary Receipts business, observed: "It's been over 20 years since the first DR programme from India was established, and while it is clear the elephant can already dance, we think the time is right to learn some new steps. We believe allowing Indian companies to attract foreign investment via non-capital-raising ADRs will create the access investors crave and encourage foreign investments, helping to meet India's economic objectives and creating value for India's corporates."

DRs play an essential role in cross-border trading and are a preferred instrument both for companies listing their shares on global markets and investors seeking international portfolio diversification. Not only do they broaden the range of investors who participate in capital markets, but adding a DR programme can also enhance the liquidity of an issuer's securities.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs