The Hindu Business Line : Underlying equities outperform ADRs

INVESTORS who have invested in the underlying equities of the Indian-listed ADRs could have outsmarted their US peers if one considers the average return given out by ADRs and their underlying equities.

While the average return posted by the group of ADRs was 1.71 per cent (without considering Sify and Rediff.com as they have not listed their underlying equities), the same for underlying equities was almost double at 3.07 per cent.

This also lags behind the Bank of New York India ADR Index, which returned 3.15 per cent.

However, taking Rediff.com and Sify into account, the average return works out to 30.67 per cent as they were the most successful counters in 2005 with the former returning 118 per cent and the latter 78 per cent.

This was comparatively close to the BSE Sensex and the NSE's S&P CNX Nifty, which have returned 41 per cent and 35 per cent, respectively. On the other hand, S&P-500 jumped 3.51 per cent and Nasdaq 1.96 per cent, while Dow Jones Industrial Average finished the year on flat note.

New peak: Also, in 2005 many ADRs touched their new peak, since their listing. For instance, ICICI Bank touched its all-time high at $31 during this year since its listing on March 28, 2000. Likewise, Satyam Computer, Sify, VSNL and Tata Motors also registered their new peaks during 2005.

After Internet ADRs, VSNL (62 per cent), Satyam Computer (39 per cent) and Tata Motors (19.54 per cent) occupied the next three spots in the gainers' list.

MTNL was the lone loser in the whole bunch; the ADR lost 14 per cent at $8.96 ($11.95).

Only the Tata Motors ADR (return of 19.54 per cent) beat its underlying equity, which gave out a return of 8.2 per cent.

Patni Computers made its debut on the NYSE; it so far gave out a return of 11 per cent at $22.63 against the offer price of $20.34.

On the premium/discount front, ADRs such as HDFC Bank, Infosys Technologies, Satyam Computer and Wipro saw their premiums nose-diving on account of secondary-sponsored ADR issues. For rest of them, it was hovering around the previous year levels with occasional fluctuations here and there.