Indian ADRs on NYSE Euronext trade at 10% premium

The bonding between Indian companies and NYSE Euronext has got further reinforced with the American Depository Receipts (ADRs) of these companies listed on the global stock exchange commanding an excellent average premium of 10.2 per cent over their underlying ordinary shares in the domestic market in 2009, an exchange release said.

Ten out of 13 Indian companies listed on NYSE Euronext platform trade in the form of ADRs on NYSE Euronext markets. These companies include Dr. Reddy's, HDFC Bank, ICICI Bank, Mahanagar Telephone Nigam (MTNL), Patni Computer Systems, Mahindra Satyam, Sterlite Industries, Tata Communications, Tata Motors and Wipro.

The other three companies – Genpact, WNS and Yatra Capital – are traded in the form of ordinary shares. The combined market capitalization of all 13 Indian companies listed on NYSE Euronext as of December 31, 2009 was at $111 billion, a gain of $57 billion over prior year. 

Access to various strata of investors at the global level provided an unbeatable edge for these ADRs enabling these companies to set new benchmarks for others to follow. The premium growth trail continued to pick up year after year, over the last three years. From 5.1 per cent of average premium in 2007, they together scaled to 6.1 per cent the next year, only to take a leap to 10.2 per cent of average premium in 2009.

Prominent among the gainers was, the US-dollar denominated ADRs of HDFC Bank, listed on NYSE, gained 82.2 per cent, compared to 70.4 per cent gain in their underlying rupee-denominated shares during the year. ADRs of Dr Reddy’s posted a gain of 147 per cent against 143.5 per cent in its underlying shares. India’s second largest bank, ICICI Bank ADRs also edged above its underlying*.

“NYSE Euronext has provided us with a leading presence and outstanding visibility in the global markets, and we look forward to celebrating our 10th anniversary of NYSE listing in October 2010. Besides enhancing our brand in key regions, the NYSE listing has given us access to a more diverse base of global investors to meet our growing capital needs,” said Mr. Suresh Senapaty, Chief Financial Officer, Wipro Limited. “And since IFRS is now accepted in the U.S., our listing and compliance requirements have been simplified, saving us considerable time and money.”

Said Ronald Kent, Executive Vice President & Head of International Listings, NYSE Euronext: “There is immense scope for more Indian companies to access the US and European markets through listing on NYSE Euronext's US or European exchanges in the coming months and years, as global investors increasingly look to participate in the growth of India as one of the world's major, fastest growing economies.”

Indian ADRs listed on NYSE Euronext have cultivated the widest variety of shareholder class the footprint of which spreads several geographies. For example, the top two investment styles of the ordinaries were heavily tilted toward growth:  Growth at reasonable price or GARP (52.3 per cent) and growth (14.2 per cent).  In comparison, the investment styles of ADR holders were a balance of growth (33.8 per cent) and value (31.2 per cent), helping cross-listed ADR issuers to diversify their shareholder base geographically and across various investor styles. 

ADR investors include Growth and Value funds, Index Funds, investors adopting GARP strategy and those base their investment style on aggregate growth.

The expanse of geographical reach of the Indian ADRs and ordinary shares listed on NYSE Euronext is also reflected in their trading volumes over the years. Over the last three years, the trading volume in these securities has grown over three fold – from 938 million in 2006 to 3, 199 million in 2009.  Despite challenging conditions prevailing in the global markets during 2009, their volume was up by 17 per cent.

Other pointers that support a bullish outlook for the Indian companies include, growing view that India, with its strong domestic-driven demand, was less affected by the global economic downturn;  Investors seeing good value in Indian companies that they believe were oversold in midst of the global downturn; Investor interest in balancing goal of achieving superior returns with a comfortable level of risk, by investing in companies that met NYSE Euronext listing criteria; and pent-up demand from investors that held onto their cash in amid the downturn.