GROUP - 2

AGENDA

GLOBAL DEPOSITORY RISK

POLICY BLIND SPOTS TRIGGER GLOBAL DEPOSITARY RECEIPT PONZIS

SEBI banned seven companies from selling securities as they
manipulate stock prices using GDR. After 15 yr. regulator identifies about the Ponzi scheme that the companies used to dupe Indian Investors . Indian Companies has been encouraged by Liberalised policy. Indian Companies raise equity through GDRs , which are listed in European Exchanges, called ADR

CONTD..
SEBI has not quantified the losses due to Ponzi scheme, but going by what the companies have declared, it could run into be hundred of crores , making GDR issue a suspect. Example Cals Retailer. These GDR are converted into Indian shares and sold, causing losses to Indian Retail Investors.

Two Way Fungibility, firstly volume has not increase , secondly sale of
GDR in Indian Exchange.

CONTD
The companies examined were less liquid before the GDR issues compared with the post GDR issues. The IDR are traded receipts of overseas companies with underlying shares with custodians. The identity of the GDR investors should be made public and mandatory for

companies to disclose the bank details in India and overseas.

The regulators have turned a blind eye to fungibility when it comes to prescribing end use of funds unlike convertibles and the external commercial borrowings.

CONTD
Most of the price rigging has been tracked to just one firm at least in SEBI
investigation , pan Asia. They have raised their traded prices because large GDR issuances from Yash Birla group has investors like figura, trendsetter, tradetec. The companies have invested in land in solar power project, bidding projects and the funds for thermal plant. Birla power raised 330 crore in 2010 via two GDRs. GDR holding stood at 33% in march 2010 which was sold off by the end of next quarter in September 2010 they have raised up to 47%which fell to 31% in June 2011. Price rigging that traps small investors and punishing the offenders the regulators

seems to be at sea.

RISE IN GOODS AND SERVICE EXPORTS

INDIA AMONG TOP 20 EXPORTING COUNTRIES IN 2010

MAKES IT TO THE TOP 10 SERVICE EXPORTERS LIST

CONTD..
Global goods export grew up by 14.5 % in 2010 after shrinking 12% in 2009. Where as India's goods export rose at the rate of 31% Indias ranking improved to 20 from 22 in 2009 Market share increased to 1.4% from 1.2%

FACTORS CONTRIBUTED TO RISE IN EXPORTS

CONTD.
Exports shifting to manufactured goods from primary products

Increase in Engineering & petroleum exports Diversification of markets Greater interaction between business communities with newer countries opens up various opportunities. Various FTAs and consolidation of SEZs

TRADE PACT NOT BEST OPTION

 Trade pact is an agreement between countries that seeks to increase the level of free trade. This is done by creating special tax, tariff and trade regulations that can reduce barriers. According to WTO report:

Free trade agreements(FTAs) and comprehensive economic

cooperation pacts do not result in increase in trade flows.

CONTD
The explosion in PTAs is not matched by an expansion in trade
flows.

Number of PTAs in the world exceed 300,only 16% global merchandise trade receive preferential treatment.

Number of PTAs increased after failure of Doha round

INDIAN DEPOSITORY RECEIPTS

MEANING:
Financial Instrument Allows foreign companies to mobilize funds from Indian markets by offering

equity Companies become Listed on stock exchanges Declaring ownership of shares of a foreign company It is proof of ownership of foreign company's shares Similar to the American Depositary Receipts or Global Depositary Receipts To globalize Indian Capital Market To provide local investors to take exposure in global companies

WHO CAN ISSUE IDRS

Company listed on the stock exchange of its country Company should have a pre-issued paid up capital and free reserves of at least $100 million

An average turnover of $500 million during three financial years

preceding issue. Issuing company should make profits for at least five years preceding the issue.

Declared dividend of not less than 10% each year for the said period

NORMS FOR ISSUE OF IDRS

Size of an IDR should not be less than Rs.50,000 crore IDR issuance should have the prior nod of SEBI An issuing company requires listing of IDRs in recognized stock exchanges in India. IDRs should not redeemed into underlying equity shares before the expiry of the one year period from the issue date. Issuing company in any financial year should not exceed 15% of its paid-up capital and free reserves

WHO CAN INVEST IN IDRS

Non- residents Indians and Foreign Institutional investors can possess IDRs by taking special permission of the Reserve Bank of India.

Minimum investment in Indian Depositary Receipts is Rs. 2 lakh.