Foreign Capital issuance

Foreign Capital issuance

Foreign capital issuance is the process by which a foreign entity raises capital through the issuance of securities in a foreign market. This can be done through a variety of securities, including stocks, bonds, and other financial instruments. The treasury market is one of the major markets for foreign capital issuance, as it is a global market that offers access to a wide range of investors.

Foreign capital issuance can be beneficial for a foreign entity because it provides access to a larger pool of capital than may be available in their home market. It also allows them to tap into the expertise and resources of foreign investors, which can help them to expand their business and grow their operations.

To issue securities in a foreign market, a foreign entity typically needs to comply with the regulations of the country where they are issuing the securities. This can include filing documents with local regulatory bodies, meeting disclosure requirements, and complying with other regulatory requirements.

Investors who participate in foreign capital issuance can benefit from the diversification of their investment portfolios, as well as the potential for higher returns than may be available in their home market. However, investing in foreign securities also comes with risks, including currency exchange rate risk, political risk, and other risks associated with investing in foreign markets.

Indian companies are permitted to raise foreign currency resources through two main sources:

• Issue of foreign currency convertible bonds more commonly known as Euro issues.
• Issue of ordinary shares through depository receipts namely ‘Global Depository Receipts (GDRs)/American Depository Receipts (ADRs) to foreign investors i.e. to the institutional investors or individual investors.

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