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PME

The document discusses foreign debt instruments like bonds and shares, highlighting their advantages and disadvantages, such as increased foreign exposure and lesser returns. It also explains Indian Depository Receipts (IDRs) and their trading process in India, alongside the Foreign Direct Investment (FDI) policy aimed at promoting industrial and socio-economic development in India. The FDI policy is regulated by various government bodies to facilitate foreign investments and has been liberalized since 1991.

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Divya Chopra
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34 views5 pages

PME

The document discusses foreign debt instruments like bonds and shares, highlighting their advantages and disadvantages, such as increased foreign exposure and lesser returns. It also explains Indian Depository Receipts (IDRs) and their trading process in India, alongside the Foreign Direct Investment (FDI) policy aimed at promoting industrial and socio-economic development in India. The FDI policy is regulated by various government bodies to facilitate foreign investments and has been liberalized since 1991.

Uploaded by

Divya Chopra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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FOREIGN DEBT (BONDS)

• A bond issued by a foreign borrower in the currency of the country in


which it is sold. Examples include Yankee bonds (US dollar denominated
bond issued by a foreign borrower in the US), Samurai bonds (issued in
Japan and denominated in yen) and Bulldog bonds (issued in the UK in
sterling).

• A major advantage of this is increased foreign exposure without bearing


the risk of fluctuating exchange rates.

• A major disadvantage is lesser returns tend to accrue as compared to direct


investment in these companies.
FOREIGN SHARES
• Foreign Issue of shares implies issuing shares of a company to the
residents of another company.
• Foreign Issue can be through the mechanics of depository receipts or
even cross listing.
• Cross listing of shares is when a firm lists its equity shares on one or
more foreign stock exchange in addition to its domestic exchange.
• ADRs, GDRs and the like are a mechanism to repackage a security
primarily listed on an Exchange to enable it to be purchased by an
investor outside of that market. This is a distinct instrument, as not all
the rights may come with the ADR (GDR,EDR,IDR, etc.)
INDIAN DEPOSITORY RECEIPTS
• An IDR is a receipt, declaring ownership of shares of a foreign
company. These receipts can be listed in India and traded in rupees.

• An Indian investor pays in Indian rupees for the IDR whereas a


shareholder in the issuer's home country pays in home currency.

• According to SEBI guidelines, IDRs will be issued to Indian residents in


the same way as domestic shares are issued. The issuer company will
make a public offer in India, and residents can bid in exactly the same
format and method as they bid for Indian shares.
Foreign Direct Investment Policy…
• Foreign Direct Investment (‘FDI’) – cross border investment with an objective to
establish ‘lasting interest’

• Objective - to encourage FDI to promote industrial & socio-economic development;


supplement domestic capital/ technology

• Foreign investment in India is regulated by Government of India’s FDI policy. The FDI
guidelines administered by the Ministry of Commerce and Industry.

• Department of Industrial Policy & Promotion (‘DIPP’), Foreign Investment Promotion


Board (‘FIPB’) and Secretariat of Industrial Assistance (‘SIA’) regulate the FDI Policy

• GoI has set up the Foreign Investment Implementation Authority (FIIA) to facilitate quick
translation of Foreign Direct Investment (FDI) approvals into implementation, to provide
a one-window to foreign investors by helping them obtain necessary approvals, sort out
operational problems and meet with various Government agencies

• Administrative and compliance aspects of FDI monitored by RBI

• Since 1991, policy has been liberalized substantially


5 to facilitate foreign investment

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