As of my last update in September 2021, various global sources of financing are channels through which entities, governments, and businesses can raise funds from international markets. These sources include:
1. Foreign Direct Investment (FDI): FDI occurs when an individual or company from one country invests in a business or project located in another country. It involves a significant long-term interest in the target entity and often comes with managerial control or influence.
2. Foreign Portfolio Investment (FPI): FPI involves the purchase of financial assets such as stocks, bonds, and other securities issued by a foreign country. Unlike FDI, FPI does not provide the investor with direct control over the assets.
3. International Bond Markets: Governments and corporations can issue bonds in foreign currencies to raise capital from international investors. These bonds are known as “Eurobonds” and offer opportunities for global investors to diversify their portfolios.
4. International Equity Markets: Companies can raise funds by listing their shares on foreign stock exchanges, allowing them to attract investment from a broader investor base.
5. Multilateral Development Banks (MDBs): MDBs such as the World Bank, International Monetary Fund (IMF), and Asian Development Bank (ADB) provide financial assistance and loans to developing countries for various projects and initiatives.
6. Export-Import (Exim) Bank Financing: Exim banks provide financial support to facilitate international trade and investment. They offer export credit and insurance, as well as foreign investment financing.
7. Sovereign Wealth Funds (SWFs): These are state-owned investment funds that hold and manage assets on behalf of sovereign nations. SWFs invest in a wide range of assets, including stocks, bonds, real estate, and infrastructure.
8. Foreign Aid and Grants: Developed countries and international organizations provide financial assistance to developing nations through grants, concessional loans, or technical assistance.
Now, let’s discuss the salient features of the Depository Receipts Scheme, 2014. Note that the regulations and guidelines might have changed after my last update, so it’s essential to verify the most recent information from relevant authorities:
The Depository Receipts Scheme, 2014:
The Depository Receipts Scheme, 2014, is an initiative by the Government of India to facilitate the issuance of depository receipts by Indian companies on international stock exchanges. A depository receipt is a negotiable financial instrument that represents ownership of shares of a foreign company held by a depository bank.
1. Types of Depository Receipts: The scheme allows Indian companies to issue two types of depository receipts:
a. Global Depository Receipts (GDRs): These are issued and traded in international markets, denominated in foreign currencies.
b. American Depository Receipts (ADRs): These are specifically issued for the U.S. market and traded on U.S. exchanges.
2. Eligibility: Indian companies eligible to issue depository receipts under the scheme include those listed on a recognized stock exchange and those not involved in any regulatory action. The company should also be in compliance with the Companies Act and other relevant laws.
3. Intermediaries: The scheme involves various intermediaries, including Indian custodian banks, depository banks abroad, and authorized dealers (typically banks) for handling transactions related to depository receipts.
4. End-Use: The proceeds from the issuance of depository receipts must be brought into India immediately and used for the specific purposes declared in the offer documents.
5. Reporting and Compliance: Indian companies issuing depository receipts are required to comply with reporting requirements to the Reserve Bank of India (RBI) and other regulatory bodies.
6. Transferability: Depository receipts are freely transferable, subject to compliance with applicable laws and regulations.
7. Repatriation of Capital and Dividends: Investors holding depository receipts can repatriate capital gains and dividends subject to foreign exchange regulations.
It’s essential to note that regulatory frameworks may change over time, and specific details may have been amended or updated. Therefore, for the latest information, it’s best to refer to official sources like the Reserve Bank of India (RBI) or other relevant authorities.