The steep fall in GDR values has created considerable disillusionment among foreign investors in Indian paper. With the world markets falling on a daily basis and Indian shares too declining, there is remote possibility of GDRs showing any sharp turnaround. Casualty: GDR offerings being planned by a number of Indian companies, especially public sector firms.

``Most of the GDR issues by Indian companies in the 1994-96 period were over-priced. The performance of these companies after the GDR issues was also abysmal. It is not clear how some of these companies utilised the money raised through the GDR issues. Now there are no takers for theGDRs,'' said an official of an investment firm which is holding shares in Garden Silk. In fact, Garden Silk floated a $ 45 million issue in 1994. The company collected $ 26.28 per GDR (in this case one GDR constitutes five equity shares of the company). Now the GDR is languishing at $ 1.50, a fall of over 94 per cent.

Another good example is that of Core Healthcare which made a $ 70 million issue in 1996. The company got a price of $ 12.60 per GDR (constituting one equity share), but now the GDR is going abegging at $ 0.50. Arvind Mills made a $ 125 million issue at a price of $ 9.78 per GDR. However, this GDR has crashed by 90 per cent since then to $ 0.95 per GDR. Many of the FIIs currently registered with the SEBI had acquired these shares in the GDR boom in 1994-96.

Century Textiles of the Birlas raised $ 100 million at a price of $ 12.70 per GDR in 1994. This has fallen by over 91 per cent to $ 1.05 per GDR. The GDR of JK Corp is quoting at a discount of 90 per cent to its issue price. Similarly,CESC is quoting at a discount of 92 per cent, SIEL 91 per cent, SAIL 84 per cent, SIV Industries 92 per cent, Telco 78 per cent, Reliance (new issue) 59 per cent, IPCL 78 per cent and Grasim 82 per cent. Many of these companies managed to get a premium above the then domestic market prices by giving rosy projections to foreign investors.

As many as 65 GDR issues were floated since the government allowed Indian companies to raise money from abroad through equity offerings in 1992. Now only two GDR issues are being traded at a premium. Dr Reddy's which floated a $ 48 million issue in 1994 is now quoting at a premium of 29 per cent. ITC commands a whopping premium of 115 per cent.

Analysts feel the discount in the GDR prices is likely to affect forthcoming GDR issues. The government was keen to go in for GDR offerings in the case of GAIL, Concor and Indian Oil along with disinvestment in the domestic market. ``Now it is virtually impossible for the government to get a good price for these companies. It istrue that the global markets are facing a slump. But the slump in Indian GDRs is more than the decline in the world market or even Sensex,'' said an analyst with a foreign brokerage.

Global investments firms are still bullish on Indian paper. ``We expect earnings growth to be 6 per cent in 1998 and 12 per cent in 1999,'' said an analyst with Merrill Lynch. Morgan Stanley Dean Witter of the US has predicted a 10 per cent earnings growth for 1998. Morgan's overweight position in India is 12 per cent as against Asia Pacific weighting of 8.9 per cent.

Still, one reason for the falling appetite for Indian paper can be downgrading of India by rating agencies like Moody's and Standard & Poor. Moreover, with each point fall in Dow Jones and Nikkei, Indian GDRs are also taking a dip. Adding to this, the selling by foreign investors in Indian bourses is continuing. FIIs sold pulled out shares worth $ 108.1 million from Indian markets in August. This trend is likely to continue for the next couple ofmonths.