Suzlon, Tata Power GDRs start trading on LSE

Two new Indian Global Depositary Receipts were admitted to trading on the Luxembourg Stock Exchange on Monday.

The first was for wind energy major Suzlon Energy Ltd. Its issue comprised of 14,600,000 GDRs representing 58,400,000 equity shares of the company; allowing it to raise $127 million for general purposes.

The other listing was for The Tata Power Co Ltd, one of the largest private sector electricity generators in India, which issued 14,838,110 GDRs, each representing one equity share of the company. The proceeds of the issue, amounting to $378 million, will be used to fund capital expenditure of its existing power plants and future projects.

The LSE is well known for its GDR activities in India. The admission to trading of the two GDRs means that the LSE has listed a total of eight new GDRs so far in 2009.

Indian companies seem increasingly keen on GDRs, as Tata Steel too resorted to this route to raise funds this year. Raising money through GDRs is seen as swapping debt with equity at the international level. Companies with foreign stake holding can repay their foreign liability raising foreign money, resulting in balance sheet restructuring.

A GDR is an instrument that represents shares in the issuing company, and is particularly useful for companies in emerging markets by enabling them to gain access to foreign capital markets. For investors, mainly institutional, GDRs are often the simplest means to invest in specific shares without buying them at local level.

The Luxembourg Stock Exchange was the first European exchange to list a GDR, and has experience in depositary receipts going back to the 1960s.