Deutsche Bank on the Joy of Depositary Receipts
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Deutsche Bank (FWB:DBK)(NYSE: DB) discusses depositary receipts (foreign stocks traded on local exchanges) and the role DRs play in global investing. As one of the world's four depositary banks that manage the 3,600+ DRs around the globe, Deutsche Bank accounts for over 970 DR programs (with a market value of at least USD 100 billion) in 58 countries.
Akbar Poonawala is the Managing Director and Regional Head for the Americas of Global Transaction Banking (GTB) at Deutsche Bank. In addition, he serves as the Global Head in charge of the Global Equity Services group, which includes the Depositary Receipts, Registrar, and Post-IPO Services businesses within GTB. He obtained his undergraduate degree in Advanced Accounting from India’s Poona University, his MBA from New York University’s Stern School of Business and holds a CFA charter from the CFA Institute, USA.
Nick Slepko: How did you get involved with DRs?
Akbar Poonawala: I began in earnest in the mid- to late-'90s when I was helping Deutsche Bank become the depositary bank for an up-and-coming Indian firm named Infosys (NYSE: INFY). It was an important landmark for Deutsche Bank due to the fact that it was the first American depositary receipt (ADR) to come out of India. From then onwards, the Deutsche Bank depositary receipt (DR) business has witnessed significant growth on a global basis and it has been very satisfying to be part of that success.
Slepko: With Infosys, what in particular tipped the scales in favor of Deutsche Bank over the other three depositary banks?
Poonawala: It continues to be customized servicing, customized reporting, and a focus on shareholder servicing and shareholder value creation, as well as allowing access to multiple channels.
For instance, we recently extended our relationship with a large European issuer in the financial services sector following a competitive review of depositary banks. The company had been using our depositary services for over ten years and cited our “unblemished client service track record” as the main reason for choosing Deutsche Bank. Being client-centered and providing services to fit the company’s US investor relations objectives allows us to stand out in the industry.
Slepko: What role did Deutsche Bank play in making Infosys a bigger, better company?
Poonawala: There are a host of factors that determine a company’s valuation. The primary determinant is the performance of the company. A secondary driver is the outlook for country, sector, and currency, amongst other things. We believe that the depositary bank also makes a contribution and a difference.
As a depositary bank, we have done a lot of interesting things with Infosys. We helped them to structure and launch a POWL (a public offering without listing) in Japan, the first by an Indian company with ADRs. We also worked with them on one of the first ever Indian company-sponsored secondary offerings, an avenue allowing domestic Indian investors in ordinary shares to sell in the form of ADRs to take advantage of the premium that existed in the price of the ADR. We also did a couple of rounds of secondary offerings on the NASDAQ. With that, the outstanding float on the US exchanges was sufficient to qualify Infosys for inclusion in the NASDAQ-100 [PowerShares QQQ Trust (NASDAQ: QQQ)], the first such inclusion by an Indian company.
Infosys was the first Indian company to be included in the QQQ. Going from a start-up company less than 30 years ago to a USD 25 billion market cap company has been a phenomenal journey. It’s great to be a part of that growth in some way by assisting with road shows, arranging investor analyst meetings, performing target shareholder reporting for them – things like that.
We’ve also been the recipient of letters like the one from a school teacher in Boston which said, “Thank you for making a company like [Infosys] accessible to individual shareholders like me who can buy small lots of shares.”
It would have been cost-prohibitive for the school teacher to have bought Infosys on the Indian exchange given the currency situation, the time zones, and the laws and procedures at the time. Which brings us to the key point: An ADR is a hugely enabling instrument that allows US investors – institutional for sure, but more particularly individual investors – to own and hold non-US securities almost like they were US securities. So a school teacher can follow growth all over the world on Yahoo and read articles on Motley Fool, and then actually go out and be a part of it by owning SAP from Germany, Credit Suisse from Switzerland, and Infosys from India, as easily as they could purchase shares of Apple or Google.
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Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.