JOIN USAs on September 15, 2011, the average return on investments (a measurement of the difference in the offer price and the market price) by all the GDRs issued in 2010 was negative 52 pre cent.
The underperformance is significant when compared to the average return of negative 7 per cent by S&P CNX 500 during the same period. Information technology, media and consumer staples companies were the major underperformers.
Indian companies have been the most active GDR issuers, accounting for 68 pre cent of the total listed GDRs on the Luxembourg Stock Exchange as of December 2010. During 2010, Indian companies, predominantly small and mid-cap companies, raised around Rs 56.8 bn ($1.2 bn) through the GDR route.
CRISIL Research analysis further reflects that, in absolute terms, the market value of the funds mobilised through GDRs has eroded by 47 pre cent (difference between capital mobilised and its current market value) to Rs 30.3 bn ($0.6 bn).
Most GDRs trading 40-60 per cent below their offer price. In percentage terms, Teledata Technology Solutions’ GDR is the worst performer with its price on September 15, 2011, trading 93 pre cent below the offer price.