Although investing opportunities are not bound by borders, access to them is often limited for investors. Those keen to invest at a distance have few options in hand. One of the common ways to take exposure to foreign stocks is through exchange traded funds or mutual funds that target specific countries or regions. The second and more direct way is to collaborate with brokers providing trading facilities of stocks in other countries, but the procedure is cumbersome and involves issues of currency exchange and trading hour time difference, among other impediments.
The simpler way for US citizens to invest in stocks of foreign countries can be through American Depository Receipts (ADR), which help in trading on US bourses like Nasdaq, NYSE or Over-The-Counter. Although only select foreign companies trade as ADRs, this limitation can be a seen as a filter as well. This is especially true for companies trading on NYSE or Nasdaq, which require going through elaborate regulatory procedures before listing. These reduce the chances of fraud or incorrect representations by companies to a great extent while making investing ‘simpler and flexible’ for investors as compared to direct investment in a foreign market.
Here are the most popular companies in India, which trade as ADRs in the US.
WIPRO Limited (WIT) is a global information technology, consulting and outsourcing company that helps customers to do business better. The company was established as Western India Vegetable Products Limited in 1945 and was listed on the NYSE in the year 2000.
WIPRO posted revenues of $7.51 billion and net income of $1.38 billion for fiscal 2015. The company’s revenue increased by 10.1%, 5.5% and 3.2% in 2013, 2014 and 2015, respectively, while the net income moved up by 11.7%, 6.9% and 5.9% during the same period. The company has a market capitalization of $30.11 billion. The share price of WIPRO zoomed up by 59% in 2013 while 2014 witnessed a dip of 10%. In the current year the shares are up by 9% year-to-date. There exists great opportunity for the company to expand and grow domestically as well as globally, given its sound financial base and diversified business opportunities.
Vedanta Limited (VEDL) is one of the world’s largest natural resources company with presence in India, South Africa, Namibia, Ireland, Liberia, Australia, and Sri Lanka. The company was incorporated in 1975 as Rainbow Investment Limited, a year later, its name was changed to Sterlite Cables Limited and then again to Sterlite Industries (India) Limited in 1986. In 2013, as a result of the merger of Sesa Goa Limited and Sterlite Industries (India) Limited, the name was changed to Sesa Sterlite Limited, which was renamed in April 2015 to Vedanta Limited. The company has been trading on NYSE since 2007.
The trend of decline in commodity prices in recent years has impacted Vedanta’s profitability. Vedanta reported a drop of 8.72% and 3.47% in revenue at the end of fiscal 2014 and 2015. Investors are wary about the slowdown in business with the ‘commodity cycle’ coming to an end, something that has negatively impacted its share prices, which are down by 63% year-to-date in 2015.
WNS Holdings Limited
WNS Holdings Limited (WNS) started its journey in 1996 as an in-house unit of British Airways. By 2003, it started to focus on providing process outsourcing services to third parties. WNS has grown through a mix of organic and inorganic growth initiatives and today the company is a leader in global business process management (BPM) with a market capitalization of $1.45 billion.
WNS Holdings Limited has a strong financial record with its profits and revenue growing at a healthy rate on the back of a favorable currency movement, among other things. The company’s revenue was recorded at $533.89 million at the end of fiscal 2015, a rise of 6.22% year-on-year while its net income increased 40% to touch $58.61 million. The shares of WNS increased by a whopping 110% in 2013, while corrected by 5.71% in 2014, the stock is up 36% year-to-date in 2015. The strong growth in revenue, rising net income and currency trends portray a positive picture for the stock.
HDFC Bank Limited
HDFC Bank Limited (HDB) was incorporated soon after the liberalization of the banking industry by the Reserve Bank of India in 1994 and commenced its operations in January 1995. HDFC Bank Limited, which is two decades old now, is one of India’s largest and most reputed banks. HDFC offers a complete suite of products (retail banking, wholesale banking and treasury) to meet diverse customer needs, be it individuals in both urban and rural areas, corporate or government institutions.
HDFC has a sound financial track record that projects steadiness and growth. The company declared revenue of $9.28 billion, an increase of 12.38% year-on-year at the end of fiscal 2015 with a net income of $1.58 billion, a rise of 19.40% vis-à-vis fiscal 2014. The shares of HDFC Bank Limited were down by 18% in 2013 while they bounced back with 54% returns on 2014. HDFC Bank Limited is currently up 18% year-to-date. The vastly ‘under-banked’ scenario presents about the huge prospects for banks to expand and penetrate into those areas of the country.
Founded in 2000, MakeMyTrip Limited (MMYT) is India’s leading travel company that allows users to make airline and rail bookings as well as hotel reservations online. The company is a dominant player with a market-share of 47% (PhocusWright, 2013). MakeMyTrip Limited made a very impressive debut on Nasdaq in 2010 with its share prices gaining as much as 75%.
While the company reported a 17% increase in its revenue for fiscal 2015 vis-à-vis the revenue for fiscal 2014, its net income has struggled to stay positive. The company has made many investments in recent past that should pay off with time, however, for now the lukewarm response by investors is evident in its share prices, which are down by 48% year-to-date in 2015. Increased use of internet coupled with the growing middle class in India does offer room for growth; MakeMyTrip needs to combat stiff competition from peers.
SIFY Technologies Limited (SIFY) was incorporated in 1995 as Satyam Infoway Private Limited. SIFY is among the largest providers of integrated information and communications technology solutions and services. The company was listed on Nasdaq in 1999 and currently has a market capitalization of $187.45 million.
While the company reported an increase of 17% in its revenue to touch $205.56 million at the end of fiscal 2015, the net income hasn’t shown a great performance over the last few years. The investor disappointment is reflected in its share price movement. The shares were up by 9% in 2013, while they dropped by 37% in 2014 and are down by 23% year-to-date in 2015.
Dr. Reddy’s Laboratories Limited
Dr. Reddy's Laboratories Limited (RDY), founded in 1984, is a leading global pharmaceutical company engaged in manufacturing and marketing a range of pharmaceutical products and services. Dr. Reddy’s made its debut on the New York Stock Exchange (NYSE) in April 2001, and currently has a market capitalization of $10.90 billion.
The company has a strong financial position; it has experienced a rise in its revenues over the years with the latest annual revenue standing at $2.38 billion at the end of fiscal year 2015. The debt levels are reasonable with a positive trend in net income. The shares of Dr. Reddy’s rose by 23% in 2013. Even in the year 2014, its shares maintained the momentum and rose another 23%; its shares are currently up by 27% year-to-date in 2015. Although, the stock movement is volatile during the uptrend, it is one of the good picks in the healthcare space.
Rediff.com India Limited
Rediff.com India Limited (REDF), incorporated in 1996, is a Mumbai-based internet company that provides digital content and commerce services. It operates through two major segments, one being the India Online Business and the other the US Publishing Business. Rediff.com India Limited became India’s first dot.com company to be listed on Nasdaq.
The share price of the company dropped by 19% and 15% in 2013 and 2014 each, the weakness has continued with its shares down by 47% year-to-date in 2015. Rediffmail.com Limited reported revenue of $15.34 million for the fiscal year 2015, a decline of 4.86% year-on-year while its net income was reported at ($13.81 million), further from 85% of the net income of ($7.47 million) in the previous fiscal. The share prices have taken a beaten, given the dismal performance reflected by the company’s earnings in the last few financial years.
ICICI Bank Limited
With total assets worth $103 billion, ICICI Bank Limited (IBN) ranks as the largest private sector bank in India with operations spanning across 17 countries. The subsidiaries of the bank are among the largest companies in areas of securities brokerage, asset management, private equity and insurance. ICICI Bank Limited was promoted by ICICI Limited, an Indian financial institution in 1994 soon after the policy changes allowed private sector banks to operate in India. ICICI Bank was the first Indian company to be listed on the NYSE in 1999 as well as the first bank from non-Japan Asia.
The bank has lately struggled with the rising figures of bad loans. According to ICICI Bank’s SEC Filing, "We experienced a significant increase in the downgrade of standard restructured loans to the non-performing category, which increased from $112 million (Rs. 730 crore) in fiscal 2014 to $694 million (Rs. 4,510 crore) in fiscal 2015, due to the failure of some of our restructured borrowers to perform as expected”. The skepticism about the bank’s asset quality is reflecting on its share price, which is down by almost 31% year-to-date. This can be a good opportunity for investors to buy shares with a long-term view as ICICI Bank is will emerge back strong from the current chaos and financial stress.
Infosys Limited (INFY) was started by seven engineers in 1981 with a capital of just $250. Three decades hence, Infosys is the second largest global consulting and IT services company (in terms of revenue) in India and a world renowned name providing services to enterprises based in North America, Europe and Asia-Pacific region. Infosys was the first Indian company to be listed on Nasdaq in the year 1999, it eventually included in the Nasdaq-100 index in 2006. In 2012, the company shifted its Nasdaq-listed ADRs to the New York Stock Exchange.
Infosys reported revenue of $8.71 billion for the fiscal year 2015, a rise of 5.6% year-on-year. The revenue rose by 5.7% and 11.5% during the fiscal 2013 and 2014, respectively. The share price of Infosys spiked by almost 34% in 2013 followed by 11% in 2014; in the current year the shares are up by almost 20% year-to-date. The company is looking at grow at 10-12% at constant currency during the current fiscal 2016 and aims to achieve a goal of $20 billion in revenue with an operating margin of 30% by 2020.
TATA Motors Limited
Tata Motors Limited (TTM) established in 1945 is India’s largest automobile company and engages in designing, manufacturing and selling vehicles of almost all categories. It is a leader in the commercial vehicle segment and among the top players in the passenger vehicle segment. Some of the acquisitions by Tata Motors have been that of Jaguar Land Rover and South Korea’s Daewoo Commercial Vehicles Company.
The company can boast of strong revenue growth over the years. Tata Motors reported revenue of $42.04 billion for the fiscal year 2015, a rise of 7% vis-à-vis the previous fiscal. Tata Motors was listed on NYSE in 2004 and currently has a market capitalization of $ 11.91 billion. The shares of Tata Motors were up by 7% in 2013 and 37% in 2014. However, despite strong revenue and future growth prospects, concerns over China’s slowdown and thus sales of luxury cars have pulled down its stock by 47% year-to-date in 2015. Nevertheless, Tata Motors is well-positioned to recover from this current phase of weakness and can be a good long-term buy.
According to the records of BNY Mellon, Grasim Industries Limited (OTC: GRSXY) and Mahanagar Telephone Nigam Limited (OTCQX: MTENY) are traded over the counter in the US. Grasim Industries Limited a flagship company of the Aditya Birla Group in India was started as a textile manufacturer but eventually diversified into the business of Viscose Staple Fibre and Cement. The shares of Grasim Industries are listed as global depository receipts on the Luxembourg Stock Exchange. Mahanagar Telephone Nigam Limited or MTNL for short is a state-owned telecommunications company providing fixed-line service, internet and mobile services in the cities of Mumbai and Delhi. MTNL provides telecommunication services in Nepal and Mauritius through joint ventures and subsidiaries. According to reports, more than 50 Indian companies will soon be trading over the counter in the US. These will be Level 1, unsponsored ADRs.
Fiscal year for Indian companies ends March 31 and Year-to-Date (YTD) returns and market capitalizations are as of September 30, 2015.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.