Here are two main ways they do this:
- Issuing Foreign Currency Convertible Bonds (FCCBs): These bonds are similar to regular bonds, but they can be converted into shares of the company’s stock at a predetermined price and time. This allows foreign investors to invest in rupee-denominated debt while still having the potential to benefit from the company’s stock price growth.
- Issuing Shares Through Depository Receipts (DRs): These are certificates representing shares of the Indian company that are traded on foreign stock exchanges. There are two main types:
- American Depository Receipts (ADRs): These are traded on US stock exchanges like the NYSE or NASDAQ.
- Global Depository Receipts (GDRs): These can be traded on various stock exchanges around the world.
Benefits of DRs for Indian Companies:
- Raise capital from a wider pool of foreign investors.
- Increase their global profile and liquidity.
Benefits of DRs for Foreign Investors:
- Invest in Indian companies without having to trade on Indian stock exchanges directly.
- Trade the shares in their own currency (usually USD).
Note: Although DRs are denominated in foreign currency, the underlying value is still tied to the Indian company’s performance, so there’s still currency risk involved.