Overseas-listed firms face the downturn heat as GDR, ADR prices decline

Prices of GDRs/ADRs of companies listed on overseas bourses have decreased since Jan 1,2008, when the Sensex was at its higher level. All the old economy and new economy stocks having overseas listings in the form of GDRs/ADRs showed downward trend in their prices. And the Instanex Skindia DR Index decreased by 2,360.54 points or 64.8% to 1278.89 on Dec 23, ?08 from the level of 3639.43 on Jan 1, 2008. The Skindia GDR Index P/E ratio also declined from 31.44 on Jan 1,2008 to 11.54 on Dec 23,2008. On the other hand Sensex decreased by 10,613.96 points or 52.3 % to 9,686.75 on December 23, 2008 from the level of 20,300.71 on Jan 1, 2008.

An analyst from the market said ? The markets are reacting to negative cues from US to sub-prime losses and world recession, the sensex lost more than 10,600 points from its peak.?

?Volatility in rupee led to decline in IT stocks and sub-prime losses led to decline in banking and real estate stocks,? he added. Larsen & Toubro?s GDR price decreased significantly by $88.75 or 84.3%( 62.4% in domestic market) to $16.50. On Dec 23,?08 from $105.25 on Jan 1,?08.Other notable declines are shown by companies such as Reliance Inds (down $95.85 or 64.8% (-55.7%) to $51.9) and SBI (down $67.5 or 55.3% (-44.9%) to $54.5 ).

The percentage decline of the new economy scrips since Jan 1, 2008 to Dec 23,2008 is in fact lower in magnitude compared to old economy scrips. ICICI Banks?s ADR price moved downward by $44.01 or 71.5% since January 1,?08. Other notable companies among new economy scrips are Infosys Techno (down $20.05 or 44.2% to $25.31 and Satyam Computers (down $19.37 or 72.5% to $7.35).

Instanex Skindia DR Index and constituents tracking GDR/ADR prices, has eight GDRs and seven ADRs on its list. Instanex Skindia DR Index decreased by 731.71 points or 20.11% to 2907.72 on Feb 11, ?08 from its previous level of 3639.43 on Jan 1,2008. And thereafter it reached a lower level of 1,278.89 on Dec 23,?08 after reaching a higher level of 3,124.29 on May 2,?08. The highest rise and fall in the index were witnessed on Oct 13, ?08 (17.2%) and Aug 9,?08 (-11%) respectively.

The premium, which was 1.47 % on Jan 1, increased to 4.33% on Dec 23,?08. Satyam Computers saw its ADR premium increase during study period. Satyam Computer?s ADR traded at a premium of 18.72% on Jan 1, ?08 compared to a premium of 27.36% on Dec 23,?08. However REL which traded at a premium of 1.40% on Jan 1, ?08, significantly decreased to 0.44% on Dec. 23,?08. On the other hand, ITC which traded at a discount of?2.17% on Jan 1,2008, turned out to be in premium of 0.10% on Dec 23,2008.