QIPs up 146% but growth in DRs is equally good

The attempt by Securities and Exchange Board of India to encourage Indian companies to raise money domestically through qualified institutional placements has not deterred domestic companies to raise funds through the American Depository Receipts and Global Depository Receipts.

Written by Markets Bureau

April 3, 2008 01:03 IST

The attempt by Securities and Exchange Board of India (Sebi) to encourage Indian companies to raise money domestically through qualified institutional placements (QIPs) has not deterred domestic companies to raise funds through the American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).

According to the data from Sebi, in 2007, the capital raised through QIPs has grown by 146% from $1.3bn in 2006 to $3.2 bn in 2007, while the capital raised through the GDR and ADR route has also grown by a significant 92% from $3.8bn in 2006 to $7.3bn in 2007.

After the rollout of QIPs by Sebi in May 2006, it became a favorable route to raise funds by Indian companies as compared to depository receipts (DRs), as the compliance requirements were higher than that required by the Indian regulators. However, continuous relaxation of the US regulations has not curtailed companies from using DRs to raise funds. Bharat Reddy, chief representative, JP Morgan, said, ?The US is continuously relaxing entry as well as exit norms for non-US firms. The pendulum is beginning to swing towards striking a prudent balance between efficient capital formation and investor protection. This trend bodes well for the ADR market and we expect more ADR listing over the coming years.?

This article was first uploaded on April three, twenty eight, at three minutes past one in the night.