c ASSIGNMENT ON ADRs &

GDRs ISSUED BY c

c
c
Submitted to: Submitted by:

Ms. Nisha Mary Thomas Avni Agarwal (A- 07)

Ayushi Jain (A- 08)
Simran Gosain (A-09)
Isha Milap (A- 16)
Ankit Gupta (A- 41)
Rishibha Rai (A- 48)
ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccRinikaGautam (A-61)
 ADR stands forc American Depository Receipt
c Similarly, GDR stands forc | oba
Depository Receipt
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Every publicly traded company issues shares ² and these shares are listed and

traded on various stock exchanges. Thus, companies in India issue shares which

are traded on Indian stock exchanges like BSE (The Stock Exchange,

Mumbai),NSE (National Stock Exchange), etc. These shares are sometimes also

listed and traded on foreign stock exchanges like NYSE or NASDAQ (National

Association of Securities Dealers Automated Quotation).

Both ADR and GDR are depository receipts, and represent a claim on the

underlying shares. The only difference is the location where they are traded. If

the depository receipt is traded in the United States of America (USA), it is

called an American Depository Receipt, or an ADR. If the depository receipt is

traded in a country other than USA, it is called a Global Depository Receipt, or a

GDR.

ADRs and GDRs are not for investors in India ² they can invest directly in the

shares of various Indian companies. But the ADRs and GDRs are an excellent

means of investment for NRIs and foreign nationals wanting to invest in India. By

buying these, they can invest directly in Indian companies without going through

the hassle of understanding the rules and working of the Indian financial market ²

since ADRs and GDRs are traded like any other stock, NRIs and foreigners can

buy these using their regular equity trading accounts.c

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 c cis an Indian Government-owned telephone service

provider in the cities of Mumbai, Thane, New Delhi, and Navi Mumbai in India.

The company was a monopoly until 1992, when the telecom sector was opened to

other service providers. MTNL provides fixed line telephones, cellular connection

of both GSM ³ Dolphin(Postpaid) and Trump (prepaid) and WLL (CDMA) ³

Garuda-FW And Garuda-Mobile and internet services through dialup and DSL ³

Broadband internet TriBand. MTNL has also started Games on demand, video on

demand and IPTV services in India through its Broadband Internet service called

Triband.

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 c con Thursday became the ninth Indian company to

be listed at the New York Stock Exchange and the shares changed hands at

$5.9 a share.

"Over 31,000 American Depository Receipts have been traded on the floor

during the first 45 minutes of trading at $5.9 a ADR and there was more

demand for the scrip," Narinder Sharma, chairman and managing director,

MTNL, told reporters from NYSE.

Asked whether the company has plans to enter the American market directly

to raise funds by issuing fresh ADRs, Sharma said, "yes, as our plans unfold

in the next two to three years, we would look at the option."

"The American market is bigger and it has specific allocation for the telecom

sector as well as region specific funds. In case we do need to come here,

there will be greater response from the American investors,"

The government had divested approximately 275.6 million shares (including 70

million shares through Global Depository Receipt) upto March 2001.

MTNL's outstanding shares as on March 31, 2001 were 630 million (including

30 million to GDR) out of which government owns 354.3 million shares (56.25

per cent).

After the listing of MTNL scrip, NYSE chairman Bick Grasso said that about

50 Indian companies were likely to be listed at the NYSE in the next two to

three years.

Grasso appreciated MTNL management and the Indian government for taking

decision to list MTNL scrip at NYSE post September 11 terrorist attack on

the US.

"Investors across the world and also in the US are eagerly waiting for

participating in great Indian companies," Grasso said.

Basic telecom operator in Delhi and Bombay recently launched its cellular

services under the brand name Dolphin besides offering host of other

communication services including Wireless in Local Loop (WLL),ISDN and

Internet.

V VAL |AIN
AB V 2 BILLI N D LLARS WAS

SEV BY A HAND
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C ANIES INCLDIN| B
IR |ENECV V SEC LENDER ICICI BANK
AND VELEC  AJ R VNL.

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chas recently been in the news for its

conversion of GDRs to ADRs for listing on the New York Stock Exchange.
While the timing may seem a bit surprising with the US economy in recession,

the company seems bullish on th e prospects.

In an exclusive interview to Business Line, Mr S. Sundaresan, Director

(Finance), spells out the reasons for going in for a conversion and also dwells

on the future plans of the company.

MTNL has already listed its ADR on the New York Stock Exchange. Trading

will begin on September 8, 2001.

MTNL had first tapped the overseas market with a 30-million GDR issue in

1997. There were also plans to come out with a second GDR issue last year.

However, our merchant bankers advised us against doing so due to the adverse

market conditions. We were told that ADRs were more of a retail instrument

than GDRs. A GDR is primarily meant for the institutional investor and is

subscribed by pension funds, and mutual funds.

By converting the GDRs to ADRs, we will be ensuring a lot of liquidity in the

market. What is more, telecom stocks are a prized possession in the US, next

to treasury bonds. That is the reason for going in for the conversion.

What is more, as and when we decide to go in for an IPO, our ADRs will fetch

us good returns. Although there is no decision to go in for an IPO in the

immediate future, the option is open to us. So it was a logical step for us to

get listed at the New York Stock exchange.

MTNL is amongst the foremost public sector undertakings in India in terms of

divestiture / GDR of the equity by Govt. of India. Govt. of India has

disinvested approximately 275.63 million shares (including 70 million shares

through GDR) upto 31.3.2004. MTNL.s outstanding shares as on 31.3.2004

were 630 million (including 30 million shares GDR) out of which Govt. of India

owned 354.37 million shares (56.25% approximately). The MTNL.s share has

been listed at the Stock Exchanges of Mumbai, Delhi, Chennai, Calcutta &

National Stock Exchange.

VNL was isted at the New York Stock Exchange on 6.11.2001 one more connection that
brings more transparency in its operation
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The company.s equities are considered as an excellent buy globally by Foreign

Institutional Investors, All-India Financial Institutions, Research Analysts,

Merchant Bankers etc.

The government on Wednesday relaxed the ADR/GDR (American depository

receipt/global depository receipts) guidelines by allowing reconversion of shares

of Indian companies into depository receipts.

Henceforth, the ADRs/GDRs redeemed and underlying shares sold in the

domestic market will be eligible for being reconverted as ADR or GDR.

According to an official release, the reconversion would, however, be governed

by the Foreign Exchange Management Act (FEMA) notified by the Reserve

Bank of India (RBI) in March 2001.

´The scheme would be governed by the operative guidelines being issued by the

RBI,µ said the release.

The domestic custodian will maintain details of ADRs/GDRs issued, cancelled,

sold, reconverted and coordinated with the company or National Securities

Depository Ltd (NSDL). This will ensure that the norms on sectoral cap is not

breached in case there is percentage cap on foreign investment or an equity

limit for automatic approval or requirement of approval from foreign

investment promotion board, said the release.

The government has also amended the Income Tax Act to extend tax

incentives to non-resident investors investing in Indian ADRs and GDRs in

foreign exchange.

This benefit will be effective from April this year.

Non-resident investors were so far offered tax sops for investing in

ADRs/GDRs offered against issue of fresh underlying shares under Section

115 AC of the I-T Act.

Mr Sinha in his Budget speech for 2001-02 had provided for limited two way

fungibility for ADRs/GDRs in terms of which converted domestic shares of

Indian companies could be re-converted into ADRs/GDRs while being subject to

sectoral caps wherever applicable.

The two-way conversion or fungibility of ADRS and GDRs was allowed through

an amendment in the issue of foreign currency convertible bonds and ordinary

shares (through depository receipt mechanism) scheme of 1993.

The measures, which are expected to improve liquidity of Indian stocks listed

abroad and boost international capital movement, was initiated way back in

1993 when government notified the foreign currency convertible bonds and

ordinary shares regulations, which has been amended from time to time.

Some of the blue-chip companies which include Infosys, ICICI, ICICI Bank,

VSNL, MTNL are expected to see higher volumes due to the two-way

fungibility.

    

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