Adr Holders Gain As Re Falls

The sliding rupee is making investors in American Depositary Receipts (ADR) and Global Depository Receipts (GDR) issued by Indian companies richer.

Following the depreciation of the rupee, the premium on the Skindia GDR Index (SGI) shot up by 20.40 per cent on Monday. According to Instanex Capital Consultants, a Mumbai-based ADR/GDR market tracker, the premium on SGI, which was 15.02 per cent on September 14, increased to 18.09 per cent on Monday (September 17).

Despite a heavy slide in the domestic share prices as well as ADR/GDR prices abroad, the lower value of the rupee against the dollar is helping the arbitrageurs to gain in the process, market sources said.

The rupee has slipped considerably since the aircraft attacks in the US. The rupee, which closed at 47.81/83 on Friday (September 14) lost 2 paise to close at 47.83/85 on Monday (September 17) only after dipping 60 paise during intra-day trading. Since last Tuesday, the rupee has lost substantially by 43 paise till Monday and a hefty 59 per cent till today. The rupee closed at 47.99/48.01 today.

On Monday, there were only nine gainers and 27 losers among the index stocks of which the major losers were ICICI Bank (ADR, down 30 per cent to $3.01), VSNL (ADR, down 26.21 per cent to $7.60) and Century Textiles (GDR, down 23.08 per cent to $0.50).

Surprisingly, despite decline in the prices abroad, the depreciation in the value of rupee continued to provide these ADRs/GDRs higher premiums over the domestic prices of the underlying shares.

The highest premium was registered in the ADR of Infosys Technologies at 58.80 per cent, Pentamedia Graphics (GDR) at 50.68 per cent, Indian Hotels (GDR) at 38.86 per cent, ICICI (ADR) at 32.21 per cent and Bajaj Auto (GDR) at 29.65 per cent.

However, in the case of the ICICI GDR, the premium was lower at 27.07 per cent, giving an additional arbitrage opportunity between the ADR and the GDR markets.

Among the top losers, Finolex Cables, which lost 9.30 per cent in its GDR value, managed to command a premium of 0.51 per cent and Gujarat Ambuja Cement, which lost 0.33 per cent in its value, gained a premium of 1.88 per cent.