Indian ADRs’ short honeymoon on US bourses - Views on News from Equitymaster

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Indian ADRs’ short honeymoon on US bourses

Jul 29, 2000

On 11th of March 1999 Infosys Technologies listed on the NASDAQ. The stock was issued at an (adjusted) issue price of US$ 17. Currently, it trades at US$ 130, implying a return of over 660%. But before you start generalizing this in the case of the other five Indian ADR issues, take a look at the chart below.

Name
(US $)
Issue Price Amount Raised
(m)
52 wk High Current
Price
% Change over
issue price
% Change over
52 wk High
Rediff (REDF) 12.0 55.2 28.0 11.0 -8.3% -60.7%
ICICI Bank (IBN) 11.0 152.2 18.8 11.9 8.5% -36.3%
Silverline Technologies (SLT) 25.0 125.0 32.0 16.4 -34.5% -48.8%
Infosys (INFY) 17.0 44.4 375.0 130.0 664.7% -65.3%
Satyam Infoway (SIFY) 4.5 75.2 113.0 15.6 245.8% -86.2%
ICICI (ICd) 9.8 273.9 42.5 10.8 9.7% -74.7%
(All prices are adusted for stock splits)

Two Indian ADR issues actually trade at a discount to issue price, with one of them, Silverline Technologies, currently trading at a substantial loss of 34%. Two other stocks, ICICI and ICICI Bank trade at a marginal premium to issue price. Only Infosys and Satyam Infoway have something to show in terms of returns.

But delve a little deeper and the situation turns grimmer. Satyam Infoway and Infosys, which have generated the highest returns post issue, have also witnessed the steepest decline from their respective 52 wk highs. In fact, all six Indian ADR issues have declined sharply in recent months. Given that the NASDAQ has lost just over 30% from its all time high, Indian ADRs surely seem to have been harder hit.

It is difficult to find out what percent of the loss in these stocks has been caused by change of sentiment on US bourses. Other factors like earnings growth and other such fundamental factors too could have contributed to this sell off. Whatever the reason, the fact remains that Indian ADRs’ honeymoon on US bourses surely seems to have come to an end.

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