Indian Depository Receipts (IDRs): Concept to Commissioning
Introduction
The capital markets have seen a steady growth, despite the international disturbances like Iraq war, terrorism threats and other natural calamites. The favorable liquidity condition and macro environmental factors accelerated further growth in Asian markets. These factors have increased the demand for Asian equities.
Listing in the stock exchanges world over is an opportunity for the firms to raise funds globally. But there are several other aspects of listing in foreign stock exchanges besides just fund raising activity. Firms are using Depository Receipts as a vehicle either to sell stake or control blocks or as a means to change their governance structure. Firms incorporated in a jurisdiction with weak investor protection rights, often try to list themselves to more developed securities markets to legally bond themselves to higher disclosure standards and stricter enforcement. This in turn helps attracting investors, who would otherwise be reluctant to invest factoring in the risk of fraud and embezzlement. Beside this, firms listing in developed capital markets experience a shift in the ownership structure. Size and liquidity of home country’s market, extent of legal rules and investor protection, capital control regulations and FDI restriction are some of the significant predictors of cross country listing. Largest numbers of foreign companies are found listed in developed markets like NYSE, London and Luxembourg. Among the emerging markets cross listing is yet to pick up. At this outset, if we look into the Ind ...