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Indian companies buck trend; seek $4bn in US
By siliconindia
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Wednesday, 22 November 2006, 18:30 IST
NEW DELHI: Against the prevalent trend among most foreign companies of avoiding New York because of the high cost of regulatory compliance, Indian companies are making a beeline to the US equities markets to raise a total of nearly $4bn, said a report appearing in the Financial Times.
Bankers told the publication that Indian groups, which have embarked on an overseas fundraising spree to fund their expansion plans, were heading back to the US because of the availability of liquidity and to broaden their investor profile.
"If you want to raise that amount of money, you need to go [offshore]," said one banker of a planned $2bn American depositary receipt listing by Sterlite Industries, the Indian metals unit of Britain's Vedanta Resources. "It's the sheer size of it."
The report further said that the Indian offerings are good news for the U.S ADR market, whose once dominant position as the fund-raising centre of choice for overseas companies has been steadily eroded by concern over the high cost of complying with Sarbanes-Oxley.
Apart from Sterliteâs depository receipt, the other planned Indian American offerings include a $1.5bn secondary offering by Infosys and a $200m secondary offering by Dr Reddy's.
Despite a of a record first half for depositary receipt issuance worldwide, the Bank of New York, said in its 2006 mid-year update that the number of US ADR issues or was at a nine-year low.
As of the end of June, the number of depositary receipt issues had risen 4 percent year on year to 1,943, most of them in London or Luxembourg, noted the publication. There were only 473 in the US, down 2 percent on a year earlier, although ADRs still comprise the majority of the world's depositary receipt market by value.
The thirst for overseas capital among Indian companies may be a source of hope for the revival of new ADR listings in the U.S.
Indian companies already accounted for 56 per cent of all new depositary receipt listings globally in the first half of this year, although these were mostly in Europe and Dubai, Bank of New York said.
Average annual growth in overseas loans and equity and debt issuance for Indian companies during the past five years was 51 per cent, outstripping by a wide margin the rest of Asia, according to a paper from the Economist Intelligence Unit and Bank of America.
In the 2005/2006 fiscal year, Indian companies raised $16bn offshore, up 75 percent from a year earlier, the EIU said.
Bankers said althoughSarbanes-Oxley remained a deterrent, they expected to see more Indian companies tap the U.S market.