Adr Gdr Final

7/21/2019 Adr Gdr Final

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ADR-GDR



AGENDA

• Introduction• Eligibility

• Issue, Trading & Redemption• Dual Fungibility• Trading & Settlement• Sponsored ADR• ase Study ! Sterlite Industries



Introduction



DEPOSITORY RECEIPTS

Are negotiable "#S# securities t$at generally representa non-"#S# company%s publicly traded e uity or debt#T$e increasing demand 'or Depositary Receipts isdri(en by t$e desire o' indi(idual and institutionalin(estors to di(ersi'y t$eir port'olios, reduce ris) andin(est internationally in t$e most e''icient *aypossible#Depositary Receipts are created *$en a bro)er

purc$ases t$e non-"#S# company%s s$ares on t$e$ome stoc) mar)et and deli(ers t$ose to t$edepositary%s local custodian ban), *$ic$ t$en instructst$e depositary ban), suc$ as T$e +an) o' e* or),to issue Depositary Receipts#



GDR

GDRs are securities a(ailable in one or moremar)ets outside t$e company.s $ome country#T$e basic ad(antage o' t$e GDRs, compared to t$eADRs, is t$at t$ey allo* t$e issuer to raise capital ont*o or more mar)ets simultaneously, *$ic$increases $is s$are$older base#GDRs are typically denominated in "SD, but canalso be denominated in Euros# GDRs are commonlylisted on European stoc) e/c$anges#



CONTD..

0ondon is t$e most important DR center outside t$e"S#Depositary receipts listed and traded in 0ondon areo' t*o types1 2ro'essional DRs and Retail DRs#T$e 2ro'essional DRs are traded by institutionalin(estors, and t$e Retail DRs are a(ailable to allin(estors and t$us $a(e to o''er a $ig$er le(el o'protection#



ADR

An American Depositary Receipt representso*ners$ip in t$e s$ares o' a 'oreign companytrading on "S 'inancial mar)ets#

Eac$ ADR is issued by a "S depositary ban) and canrepresent a 'raction o' a s$are, a single s$are, ormultiple s$ares o' 'oreign stoc)#T$e 'irst ADR *as introduced by 32 4organ in 5678,

'or t$e +ritis$ retailer Sel'ridges & o#T$e largest depositary ban) is t$e +an) o' e*or)#



TYPES OF ADR PROGRAMS

"nsponsored s$aresADRs t$at trade on t$e o(er-t$e-counter 9:T ;mar)et#

<a(e no regulatory reporting re uirements andare issued in accordance *it$ mar)et demand#T$e 'oreign company $as no 'ormal agreement*it$ a custodian ban) and s$ares are o'ten issued

by more t$an one depositary# Eac$ depositary$andles only t$e s$ares it $as issued#



CONTD..

0e(el I Depository Receipts0o*est sponsored s$ares t$at can be issued#

an only be traded on t$e :T mar)et and t$e

company $as minimal reporting re uirements*it$ t$e "#S# Securities and E/c$ange

ommission 9SE ;#T$e company is not re uired to issue uarterly or

annual reports#ompanies *it$ s$ares trading under a 0e(el 5

program may decide to upgrade t$eir s$are to a0e(el 7 or 0e(el = program 'or better e/posure in

t$e "#S# mar)ets#



CONTD..

0e(el II 90isted; Depository ReceiptsT$e 'oreign company must 'ile a registrationstatement *it$ t$e SE and is under SE

regulation#In addition, t$e company is re uired to 'ile aForm 7>-F annually# Form 7>-F is t$e basice ui(alent o' an annual report 9Form 5>-?; 'or a

"#S# company# Ad(antage1 s$ares can be listed on a "#S# stoc)e/c$ange #@$ile listed on t$ese e/c$anges, t$e company

must meet t$e e/c$ange.s listing re uirements#



0e(el III 9:''ering; Depository Receiptsompany is actually issuing s$ares to raise

capital#

In accordance *it$ t$is o''ering, t$e company isre uired to 'ile a Form 7>-F, *$ic$ is t$e 'ormat'or an :''ering 2rospectus 'or t$e s$ares# T$eyalso must 'ile a Form F- annually#

In addition, any material in'ormation gi(en tos$are$olders in t$e $ome mar)et, must be 'iled*it$ t$e SE t$roug$ Form B?#

Restricted 2rograms

Stoc) is limited to trading by certain indi(iduals#

CONTD..



CONTD..

2ri(ately 2laced and :''s$ore 9SE Rule 5CCA Regulation S; Depositary Receipts

A company can also access t$e "#S# and ot$er

capital mar)ets t$roug$ SE Rule 5CCA and orSE Regulation S Depositary Receipt 'acilities*it$out SE registration# Rule 5CCA programspro(ide 'or raising capital t$roug$ t$e pri(ateplacement o' Depositary Receipts *it$ largeinstitutional in(estors 9suc$ as I+s; in t$e"nited States#



ADVANTAGES OF A DR

For IssuersA DR program can stimulate in(estor interesten$ance a company.s (isibility, broaden its

s$are$older base, and increase li uidity#DRs can pro(ide en$anced communications *it$global in(estors and s$are$olders#ADRs pro(ide an easy *ay 'or "S employees o'

non-"S companies to in(est in t$eir companies.employee stoc) purc$ase plans#

e$icle 'or mergers and ac uisitions#



ADVANTAGES OF A DR

For In(estorsDRs ma)e it easy to purc$ase and $old a non-"Sissuer.s securitiesDRs trade easily and con(eniently in dollars andsettle t$roug$ "S international clearing $ouses#2ublicly traded DRs are registered *it$ t$einternational regulators# For e#g# 0e(el II and0e(el III ADRs may be registered *it$ t$e "SSecurities and E/c$ange ommission 9SE ;#Di(ersi'ication *it$out many o' t$e obstacles t$atmutual 'unds, pension 'unds and ot$erinstitutions may $a(e in purc$asing and $oldingsecurities outside o' t$eir local mar)et#



A COMPARISON BETWEENADR & GDR



Eligibility



Eligibility Criteria

"p to "SD > 4illion under t$e Automatic route

From "SD > -5>> 4illion, t$e companies $a(e tota)e R+I appro(al

From "SD 5>> 4illion and abo(e, prior permissiono' t$e Department o' Economic A''airs is re uired#



Co !a"ie# A$t

T$e ompany s$ould pass a +oard resolution'or ta)ing a decision 'or issue o' ADR GDR#Appro(al u s B5 – Furt$er issue o' apital#

Appro(al u s 6C – 2o*er o' limited company toalter its s$are capital#Appro(al u s 5 – Alteration o' 4emorandum#

Appro(al u s =5 – Alteration o' Articles .



MOF%RBI

ADR GDR issue s$all be treated as DirectForeign In(estment#Aggregate Foreign In(estment *ould need tocon'orm to e/isting FDI 2olicy#2ri(ate placement GDR ’s eligible 'or automaticappro(al - Issue is lead managed by anIn(estment +an)er, registered *it$ FinancialSer(ices Act, "? or appropriate regulatoraut$ority in Europe, Singapore or 3apan#



Co"t '

Issue Related E/penses+ot$ 'i/ed e/penses li)e under*ritingcommissions, lead managers c$arges,legal e/penses and ot$er reimbursablee/penses s$all be subHect to a ceiling as'ollo*s1

C in t$e case o' GDR ’s8 in t$e case o' listing on "SE/c$ange 9ADR ’s;#7 in case o' 2ri(ate 2lacement#



Co"t ' Furnishing of Information's

Within 30 days of completion of transaction companywould furnish following to Exchange ontrol!epartment of the "#I

$mount raised through $!"’s % &!"’sum(er of $!"’s % &!"’s issued

)nderlying shares offered

* of foreign e+uity le,el in the Indian ompany onaccount of issue of $!"’s%&!"’s!etails of repatriation- etc.



Se$toral Ca! o" I"(e#t e"t

2ri(ate Sector +an)ing - C6+F – 5>>

Insurance - 7Telecommunications - C62etroleum Re'ining 92(t# Sector;- 5>><ousing & Real Estate - 5>>

2o*er - 5>>



Sto$) E*$+a"ge

In rincipal $ppro,al (efore Issue andallotment.Final /isting and rading appro,al afterallotment.

$llotment and upload of redit to !omesticustodian.



Issue, Trading &Redemption



I"ter e'iarie#

1erchant #an2ers % /ead 1anager )nderwriters

,erseas !epository!omestic ustodian#an2ers

4olicitors



OPERATIONA, PROCED-RE

reparation of Financial statements incompliance with I$4% orms.

!ue !iligence exercise.o decide with /ead 1anager.u(lic% ri,ate lacementsum(er of &!"’s to (e issued

Issue rice!raft the rospectus% ffer documentsFile rospectus% ffer document



$pply to !epositories for I4I4ign ripartite $greement/isting applications to 4EFinalise (asis with " I%/1%4E/ist of re5ects 6 reasons for re5ections

"econciliation statement 6 Final ertificate1aster creation form – gi,ing details of allotment#oard resolution for allotment

Co"t '



TRANSFER & REDEMPTION

$ non7resident holder of &!" may transfer thosereceipts- or may as2 the !# to redeem thosereceipts.

In the case of redemption- !# shall re+uest! # to get the corresponding underlying 4harereleased in fa,our of the non7resident in,estor- for(eing sold directly on (ehalf of the non7resident-or(eing transferred in the (oo2s of account of theissuing co. in name of non7resident.



In case of redemption of the &!" into underlying4hare a re+uest for the same will (e transmitted(y the !# to ! # of India- with copy to issuing

co.he cost of ac+uisition of the shares underlyingthe &!" shall (e rec2oned as the cost on thedate on which the !# ad,ises the ! # forredemption.

rice of ordinary 4hare of the issuing co.pre,ailing in #4E% 4E on date of ad,ice ofredemption shall (e ta2en as the cost ofac+uisition of the underlying ordinary 4hare

Co"t '



DUAL FUNGI ILIT!



T o Way F/"gibility

1ax.limit of re7issuance of $!"s%&!"s."e7con,ersion and FII portfolio

in,estments1onitoring of re7issuanceertificate to (oth "#I 6 4E#I that

4ectoral caps are not (reached.rocess Flow – rading and 4ettlement

8ead "oomFunds through normal (an2ing channels



NonResidentInvestor

DomesticBroker

DomesticCustodian

EarmarksagainstavailableHeadroom

Broker buys shares Overseas

Depository

9 : 3

;

<= >

TRADING AND SETT,EMENT



0ea' Roo

8ead "oom is the extent to which !epository "eceiptscan (e issued under wo Way Fungi(ility with respectto the specific company.

8ead "oom ? um(er of $!"s%&!"soriginally issued minusnum(er of $!"s%&!"soutstanding furtherad5usted for $!"s%&!"sredeemed into underlyingshares and registered inthe name of the non7resident in,estor@sA



riginal Issuance 9< mn !"sancellations 0< mn !"sutstanding 90 mn !"s

ancelled (ut shares not sold 09 mn !"s

8ead "oom ? 9<79079

? ; mn !"sThe same is however subject to the Sectoral Cap

applicable to the Company

Ill/#tratio"



"ponsored ADR



SPONSORED ADR S

4ectoral ap ? /imits ;B* C :<* ? >;*

ffer made (y ompany to all 4hareholders.he sponsoring company will gi,e an option to allits shareholders indicating the num(er ofshares to (e di,ested and the mechanism how

the price will (e determined under the $!"%&!" norms."egulations go,erning the 4ponsored $!"4ponsored $!" – 4chedule of $cti,ities



REG-,ATIONS

"#I – FE1$ otification o.;9:0097"# dated1arch :- :009

1 F otification o.9<:3BB – "I dated Duly :B-:00:

"#I circular $. . @!I" 4eriesA ircular o.<:

dated o,em(er :3- :00:4E#I notification dated 1ay 9;- :003



#oard $ppro,al 4hareholders $ppro,al FI # $ppro,al

repare ffer !ocuments7In,itation to ffer 7/etter of ransmittal

$ppointment of9. ollection enters:. Escrow $gent3. )nderwriters

!espatch of documentsto shareholders atleast; hrs (efore ffer opens

SC0ED-,E o1 ACTIVITIES



4hareholders to tender shares in Escrow $ccount

ffer lose" 6 $gent to,erify documents

4u(mit documents includingransfer Instruction for !eli,ery

@ IF!A to ollection enters

ollection enters to forwardall documents to "6 $gent

Co"t '



" 6 $gent to,erify documents

"etain ,alid ones "e5ect incomplete

4end information toEscrow $gent toransfer (ac2 to

4hareholder

"egistration of $!"With )4 4E draft reliminary

rospectus issued (y)nderwriters

Co"t '



SC0ED-,E OF ACTIVITIES

$ppointment of legal experts- lead managers- in,estment(an2ers and their due diligence.

reparation of the offer document and its ,etting (y legalcounsels.Filing of the offer document and its re,iew (y 4E ."eplying to the comments of 4E and o(taining itsclearance."oad 4how for the $!" ffering.Entering into an agreement (y underwriters.4election of an $merican 4toc2 Exchange.

rice determination (y )nderwriters and creation of $!4s



Co"t '

!eli,ery of $!4s to In,estors.)nderwriters to remit the proceeds less fees and expenses toEscrow $gent within a period of one month of the closure of theissue

he issue related expenses for pu(lic issue shall (e su(5ect to aceiling of ;* in the case of &!"s and >* in the case of $!"sand :* in case of pri,ate placements of $!"s%&!"s. Issueexpenses (eyond the ceiling would need the appro,al of "#I.Escrow $gent to distri(ute the amount in proportion to the num(er

of !eposited E+uity 4hares accepted. $fter completing the transactions- the companies would need tofurnish full details of the issue to the Exchange ontrol!epartment of the "eser,e #an2 of India- entral ffice- 1um(aiwithin 30 days of completion of such transactions.



#ase "tudy on ADR



ADR 2 Sterlite I"'/#trie# ,t'.

A. Co !a"y # I"1o ompany’s ame 4terlite Industries @IndiaA /imited

Industry 1etal 6 1ining

1anagement uldip . aura

ompany India’s largest non7ferrous metals and mining company (ased on net sales

)4 /ow cost of production ma2ing with leading mar2et share in India in allthree of their primary (usiness lines- opper- Ginc and $luminumproduction

B. Ob3e$ti(e o1 I##/e

HExpanding – in,estor (ase which shall• impro,ise li+uidity of share• increase company’s ,isi(ility• increase in mar2et demand increase price of share

8elp in funding a ta2eo,er 7 $c+uiring complementary (usinesses"eduction of de(t in an amount of up to "s. =-;=< million @J9<0.0 millionA.Entering the commercial power generation (usiness 7 :-;007megawatt power plant in easternrissa state that will cost a(out J9.B (illion#uy the go,ernment's :B.< percent sta2e in 8industan Ginc /td.




B. Pro$e##B.4. Co !lyi"g I"'ia" Reg/latio"#

# ! appro,al $ppro,al gi,en (y #oard on o,. 9< (y headed (y 5/l'i! 5/ ar

4hare7holder $ppro,al Extra7ordinary general meeting of the company 7 !ecem(er 99

4E 6 #4E appro,als n Fe(ruary ::- :00> and Fe(ruary :>- :00>- o(tained in7principle

appro,als from #4E 6 4E resp.hanges in 1o$ 6

$o$"e7classify its existing authorised share capital of "s 9<0 crore into –ExistingK =0 crore e+uity shares L "s : each 6 3 crore preferenceshares L "s 90 each

on,erted intoK >< crore e+uity shares L "s : each.

B.6. Co !lyi"g it+ SEC

Form F7= $ #asic form to register $!"4u(mitted onK !ecem(er ;- :00=

Form :07F $n annual filling containing detailed financial disclosure.

Form F79 filing o register the e+uity securities underlying $!" that are offered in )4 for9st time- the offering price 6 plans for distri(uting shares/ast amended Dune. 9;




B.7. A!!oi"t e"t o1 Partie#

!epositary #an2K iti(an2- .$.

/ocal ustodian #an2 iti(an2- 1um(ai

$ppointment of )nderwriters H 1errill /ynch- ierce-Fenner 6 4mith Incorporated-1organ 4tanley 6 o.

itigroup &lo(al 1ar2ets Inc.

B.8. Ot+er For alitie#

ricing of issue rice not less than the higher than <* or less than 90* of thefollowing two a,erages @wee2ly high and low of the closingprices A!uring the six months or :7wee2 a,erage

In our case- It comes to 93.=

"oad show he management of company went for road show across )4$-Dapan 6 other mar2ets




C. I##/e Detail#Issue 4iMe@ o. of 4haresA

9<0-000-000 e+uity shares in the form of $!4930-;;0-000 $!4s in N4EIt includes 99-<00-000 $!4s in Dapanese u(lic fferingExercised 9<* of &reen shoe option 7additional9B-<=0-000 $!4s from us to co,er o,er7allotments

Face ,alue ar ,alue "s. : per e+uity sharericeK J93.;; per $!4.

otal Issue 4iMe )4J :-09= million

ost7issue e+uity sharesoutstandingK

>0 million

$!4’s share of total post7offeringK :9.:* interest

$!" ratioK 9 $!"s K 9 ordinary share

ic2er 4ym(olK 4/

Issue ExpenseK J9.=< (illion included underwriting discounts and commissionsand estimated offering expenses

Fungi(ility !ual Fungi(ility




D. ,i#ti"g Detail#

/isted 4hare 993.< million 7 N4E99.< million – unlisted in Dapan.

/isting !ate 9B%0=%0>/isting rice 9;.>

/ast rading rice 6 Oolume 9<.:> 7 9-;>:-B00



T$an% !ou

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Adr Gdr Final