It’s A Flood Of Unsponsored ADRs!

Published on Fri, Feb 13,2015 | 22:32, Updated at Fri, Feb 13 at 23:20Source : CNBC-TV18 |   Watch Video :

American Depository Receipts of over 50 Indian companies including TCS, Bajaj Finance, Apollo Tyres, United Breweries, Zee Entertainment, Titan, NTPC, Britannia, Unitech, Power Grid, Motherson Sumi, Tech Mahindra – will soon be trading over the counter in the US and many of these companies may not even be aware of this!

Last year the government notified a new depository receipts scheme that permitted the establishment of Level 1, sponsored and unsponsored ADRs for the first time. Level 1 ADRs are non-capital raising ADRs. An unsponsored ADR program is established by a foreign depository bank, without the participation or consent of the company whose shares underlie the ADR. Unsponsored ADRs trade only in the US O-T-C market. Competing depositories can establish multiple unsponsored ADRs for the same company. And an unsponsored ADR and a sponsored ADR cannot co-exist. So if a company wants to do a sponsored ADR then it has to have the unsponsored facility terminated.

The new scheme applies conditions to unsponsored ADRs – the DR holder must get voting rights and the DRs must be listed on an international exchange that means a platform for trading depository receipts, which is in a permissible jurisdiction, is accessible to the public for trading and provides pre & post trade transparency.

The scheme came into effect on December 15th and since then, Bank of New York Mellon and other foreign depository banks have made a slew of filings for Level 1, unsponsored ADRs on the back of Indian shares. When will all these ADRs start trading? And what impact could these unsponsored ADR programmes have on the Indian companies, involved…well actually uninvolved! To talk about that, CNBC-TV 18's Menaka Doshi speaks to Rajiv Gupta of Latham Watkins and Varoon Chandra of AZB.

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