92% GDRs issued by India Inc see decline in prices

In the last one year, most of the GDR/ADR issued by Indian companies have lost handsomely. Between October 7, 2010 and October 7, 2011, of the 157 companies that had listed abroad, 92% (146) companies have seen their share prices decline.

This is worse than the scene in the domestic stock exchanges where from the same set of companies, 142 showed a dip in prices.

The fall has spared no one, with even venerable state-owned Gail GDRs decreasing $16.31 or 24.7% in the one year interval. Its domestic price has decreased by only 15.3% during the same period.

?During such periods of sustained negative sentiment, many Indian ADRs and GDRs fall to discounts over local prices and others trade at lower premiums. This has happened over the past year, increasing the drop in ARD /GDR prices over their local shares, said Gautam Chand, CEO,Instanex.

In the private sector, L&T paper has gone down by $17.96 or 38.8%. Grasim Industries too has lost $5.46 or 10.3 %. Of the two scrips that bucked the trend, Reliance Industries? GDR improved to a premium of 0.20% this October compared with a discount of 5.64% in October 2010. Similarly, the premium on SBI increased significantly to 7.74% by this October, despite the downgrade by Moody?s.

So while there are reports that there has been money laundering through some GDRs, the overall story is much larger. The impact is basically due to weak macro-economic conditions in Europe than anything else.

The fall in markets abroad is a first off phenomena for Indian entrepreneurs, since the markets were opened up in the mid-nineties. In the last one year, while the Sensex decreased 20.1% (October 2010 to 2011), Skindia GDR Index slipped by 31.4%.

The highest rise and fall in the index were witnessed on August 9, 2011 of 4.27%, when markets rallied on reports of patch up in the European Union. The index fell 7.06% on August 18 when the run spread to Spain and Italian markets, too.

An analyst from the market feels that GDR prices of some Indian companies have corrected more than 50% as compared to overall GDR index of 30%.

Among the new economy stocks, Satyam Computers? ADR price moved down by $1.12 or -29.76% since October 7, 2010. But its domestic price decreased by 22.1% during the same period.

Other notable companies among new economy scrips are Tata Communications (down $7.46 or -50.5% to $7.32, domestic price down by 45.1%) and ICICI Bank (down $17.56 to $33.53, domestic price down by 27.31%).

The highest loser in terms of price was Nu Tek?s GDR followed by Coral Hub GDR during the study period.