Intermediaries as arbitrageurs: revisiting the motivations behind overseas listing
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In India’s gradual liberalisation of capital accounts since the early 1990s, one of the first areas of reform was depository receipts. Depository receipts are foreign securities issued in a foreign jurisdiction on the back of domestic securities deposited with a custodian in the home jurisdiction. These instruments may be listed on exchanges or traded on trading platforms abroad (overseas or foreign listing). They may be used for capital-raising or other purposes. The Foreign Currency Convertible Bonds and Ordinary Shares (Through Deposit Receipt Mechanism) Scheme, 1993 (the 1993 Scheme) governed these instruments until very recently. In 2014 budget, ADR/GDR regime was liberalized to allow issuance of depository receipts on all permissible securities’. The government subsequently issued the new Depository Receipts Scheme, 2014 (the 2014 Scheme)—one of its first major financial sector reforms. This paper examines the host of opportunities that these reforms open up for Indian issuers and their implications on Indian financial sector.