First IDR issue likely this year

Staff Reporter

Indian markets capable of attracting well-established global firms: Damodaran

CHENNAI: This is already the year of Indian companies making headlines with global takeovers. It could also be the year of global companies raising money in the Indian capital markets, if the predictions of M. Damodaran, chairman of the Securities and Exchange Board of India, come true.

"I believe 2007 will witness the first IDR [issue]," he said at a lecture organised by the Scientific Research Association for Economics and Finance on Thursday.

IDRs, or Indian Depository Receipts, are financial instruments that allow foreign firms to mobilise funds from the Indian markets, offering equity and getting listed on the Indian stock exchanges.

Mr. Damodaran was confident that the Indian markets were capable of attracting large, well-established global firms, since new regulation cut down the cost and time needed for an IDR issue. "That is an element of growth we are looking forward to."

Other steps the SEBI was taking to spur growth included innovative new products such as real estate mutual funds and gold exchange traded funds.

Capital Protection Oriented Schemes were aimed at encouraging new investors with the right mix of risk and returns, Mr. Damodaran said.

Explaining the rationale behind his drive to expand and develop the markets, Mr. Damodaran said: "We will grow our market because we believe growth is investor protection. It is our belief that in this market, where investors are a handful in a hundred, we need to have more investors, so the market itself is more stable... It reduces the disproportionate influence of a small number of investors."

Responding to media reports about the National Security Advisor's comment last month on terrorist outfits manipulating the stock markets to raise funds, Mr. Damodaran said the issue was being twisted out of context and assured the audience that there are "multiple levels of check" in place.

Markets-economy link

Asked whether the movement of the stock markets reflected the state of the economy, Mr. Damodaran cautiously agreed. "In an economy showing signs of sustained growth... the market will capture that."

However, he warned that the relationship between any two sets of numbers or statistics were often difficult to establish.