With the recovery in markets, GDR/ADR prices of Indian companies increased significantly during the first 11 months of 2009. This is reflected in Instanex Skindia DR Index. The index increased by 103.5% to 2,668.60 on December 4 from the level of 1,311.31 on January 1. This sharp increase in price of depository receipts (ADR/GDR) has pushed upward the index and also the price to earnings multiple (PE).
The PE ratio of the index that tracks the price changes on the overseas depositor receipts has increased from 11.73 times on January 1 to 21.88 times on December 4, with Sterlite Industries recording the highest gain in valuations.
On the other hand, the domestic benchmark, the 30-share BSE Sensitive Index or Sensex increased by 72.7% to 17101.54 from 9903.46 during the above period. Out of 15 companies, GDR/ADR prices of all companies increased during the study period, except two, namely Satyam Computers and Tata Communications.
Gautam Chand, CEO, Instanex, said, ?Skindia GDR Index has outperformed the Sensex by over 30% in the 11 months of the calendar year due to US investors searching for a higher yield on investments, a shift toward greater institutional ownership of Indian equities and demographic factors that has forced US institutional investors to look for growth.?
He added, ?GDR investors have increased their holdings of Indian offerings to $31.6 billion as of September 30, up over 100% in the past 11 months. Over the next few years, we expect institutional investors to increase their holdings of Indian equities even further as promoters’ holdings come down from their current level of 58%.?
Except two, all the old and new economy companies that have overseas listings in the form of GDRs/ADRs have shown an upward trend in their prices. Mahindra & Mahindra?s GDR price increased by 302.3%, the highest among 15 companies since January 1 to December 4. Increases are shown by other companies as well. Sterlite Industries’ ADR price went up 244.2% (222.5% in domestic market) to $19 and Tata Motors was up 250.5% (315.1%) to $15.80.
Among the new economy scrips, ADR prices of Infosys Techno went up 113.5% (107.6%) to $52.46 during the study period.
DR Dogra, CEO& MD, CARE, said, ?The worst in terms of global and Indian economy is behind us. Liquidity is easing, CDS rates are falling and FII money is flowing into emerging markets, including India. A stable government at the Centre, inclusive growth policies and robust fiscal measures have been some of the key factors for increasing flows into the capital markets. The same is reflected in the increase in the Skindia GDR Index in line with the Sensex.?
Most of the GDRs/ADRs of old economy scrips witnessed an upward trend in their prices during the study period. L&T?s GDR price increased by 119.3% (96.9%) since January 1 to December 4.
The premium, which overseas prices had over domestic, has now narrowed down. From a premium of 2.36% on January 1, it has now decreased to 1.25% on December 4. Tata Motors saw its ADR premium widen considerably during the study period. Tata Motors ADR traded at a premium of 26.14% on January 1 as compared to 1.71% on December 4. However, Gail, which traded at a low premium of 0.37% on January 1, increased to 2.56% on December 4.