Upswing in number of Indian firms tapping overseas markets

The number of Indian companies planning to raise money through issue of American Depository Receipts (ADR) and Global Depository Receipts (GDR) route is expected to jump, at least, by 50 per cent in 2005, compared with 2004.

These companies are planning to cash in on the global interest in India. So far, in this year, around 25 companies have raised money from the overseas market through the GDR route.

Sectors which are expected to dominate such issues are pharma, IT and manufacturing, among others.

"Indian companies are eager to raise funds through GDRs/ADRs/FCCBs and ECBs as corporates are making overseas acquisitions and transforming themselves into global multinationals. I expect most of these compnaies to tap the ADR route as it provided more liquidity to the investors," said a merchant banker.

Raj Bhatt, CEO, Elara Capital, a London-based investment banker who lead managed three GDR issues by Indian companies last year, said, "We see Indian corporates making overseas acquisitions and transforming themselves into global multinationals. As a result, we are in the process of beefing up our Indian operations by setting up a dedicated office in India."

The focus would be on advising Indian corporates on sourcing their overseas fund raising options, mergers and acquisitions, Raj added. Elara Capital had lead managed GDR for Sterling Biotech ($16.00 million), Aptech ($15.00 million) and Cranes Software ($12.00 million) last year.

Girish Nadkarni, chief investment officer, international business and placements of IL&FS Investmart, said, "Increasingly, Indian corporates are coming out with plans to tap the domestic and overseas markets. The outlook is very positive with robust growth expected from Indian companies to continue."

Explaining the rationale behind setting up an India-dedicated office, Raj Bhatt said, "There is tremendous growth potential in the manufacturing and services sector due to the quality improvements, adoption of world class capacities and standards and a naturally inherent labour cost advantage. Many foreign companies who have so far not taken any active interest in India are feeling compelled to incorporate India into their growth strategy and are making plans to enter India."

Many of the Indian companies are looking at acquisitions in Europe to gain access to markets/customers and supply chains.

"Elara's understanding of international markets, cross border regulations and knowledge of investor preferences is ideally suited to meet the financial requirements of Indian companies," said Raj Bhatt.