India’s Ministry of Finance has published a report recommending allowing over-the-counter (OTC) non-capital-raising American depositary receipt (ADR) programmes on any kind of securities.
Neil Atkinson, Asia-Pacific head of depositary receipts at BNY Mellon says the development is positive news both for India and those investing in Indian securities.
“The M.S. Sahoo Committee’s ground-breaking recommendations are terrific news for India and the global investment community. The introduction of the new scheme for DRs will provide global investors with convenient access to Indian companies, who in turn can attract foreign investment through this flexible and cost-efficient securities product. In permitting OTC non-capital-raising DRs, India would join more than 60 countries worldwide whose companies have established non-capital raising DR programs for secondary market investors.
The report acknowledges current regulatory constraints that inhibit foreign investment in India. There is significant international demand for Indian equity and greater access to DRs may meet some of the demand not satisfied through routes previously available.
“DRs play an essential role in cross-border trading and are a preferred instrument for companies listing their shares on global markets and for investors seeking international portfolio diversification,” says Atkinson. “Not only do they broaden and diversify the range of investors who participate in capital markets, but adding a DR programme can also provide greater visibility for issuers.
“While it could be argued that the importance of DRs has subsided since India’s onshore market has developed, DRs remain an attractive route for foreign investment into India. At BNY Mellon, we commend these ground-breaking developments which should promote greater integration of the Indian financial system with international capital markets.”
India’s Finance Ministry Publishes Report on a New Scheme For DRs
India’s Ministry of Finance has published a report recommending allowing over-the-counter (OTC) non-capital-raising American depositary receipt (ADR) programmes on any kind of securities.