GDR index at all-time low

MUMBAI, Aug 15: Foreign investors seem to be increasingly getting out of Indian shares, thereby jeopardising the prospects for some of th...

MUMBAI, Aug 15: Foreign investors seem to be increasingly getting out of Indian shares, thereby jeopardising the prospects for some of the imminent overseas offerings. Global depository receipts (GDRs) of Indian companies listed on overseas stock exchanges had taken a heavy beating with the Skindia GDR index touching an all-time low of 558.51.

During the bygone week, 65 GDRs depreciated 7.11 per cent. However, the fall in share prices in the domestic market was less severe at 2.12 per cent. The Skindia GDR Index, which had closed at 628.65 on August 6, plunged to 558.51 on August 13, a fall of 11.16 per cent. The Sensex during this period fell by 3.43 per cent.

According to Skindia Finance, the factors which contributed to this slide included the political uncertainty, the fall of yen to an eight-year low level against the US dollar and the downgrade of India’s sovereign rating by international credit rating agency Duff & Phelps. “It’s not a good time for Indian shares. The fall in GDR prices has come ata time when the government was planning to float GDR issues of some PSUs,” said an analyst with a foreign brokerage.

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As a result, 25 out of 65 GDRs were quoting at their 52-week low levels. This included blue chips like State Bank of India at $ 10.00, Reliance at $ 5.25, ITC at $ 14.50 and Indian Hotels at $ 6.35. In GDRs, the textile sector was the only gainer with 0.27 per cent while cables remained unchanged. Top losers were steel depreciating 10.58 per cent, power losing 10.44 per cent while, steel, cement and aluminium were the top losers declining 11.39 per cent, 7.57 per cent and 6.41 per cent.

According to a review prepared by Skindia Finance, it was observed that returns provided by GDRs have not been encouraging. On an average, 65 GDRs have had a negative annualised compounded returns of 29.81 per cent since issue and are currently trading at a discount of 63.30 per cent to the issue price. On August 13, 1998, only four GDRs were quoting at a premium to their issue price as against 19 on August12, 1997. The four companies were Dr Reddy’s at $ 14.00 (issue price $ 11.16), Hindalco (1st issue) at $ 11.20 (issue price $ 10.73), ITC at $ 14.50 (issue price $ 7.65, adjusted for bonus) and Orient Hotels at $ 18.00 (issue price $ 12.75).

These GDRs provided annualised compounded return of 5.72 per cent, 0.84 per cent, 14.14 per cent and 9.86 per cent respectively since the issue. Besides Dr Reddy’s which provided 12 months annualised compounded return of 27.27 per cent, none of the GDRs had positive value, while Oriental Hotels has remained changed.

The GDR issue programme of the government looks as if it is jinxed. Whenever a PSU plans a GDR issue, markets all across the Asia start to plunge. Last year government had to withdraw GAIL issue due to adverse market conditions.

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This year again, when it is planning the GDR issue of IOC and Concor, the market has started plunging. As a result, earlier in the week IOC had to scale down its GDR issue size from $ 350 million to $150-200 million and thengroup of ministers on divestment failed to arrive on the timing of the GDR issues of Concor and IOC, the report said.