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Innovative Products in InternationalMarket

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Gaurav Bhattar

From

Rajasthan

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Jignesh Nayak

FromGujarat

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Sudipto Roy

FromWest Bengal

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Krushna Mantri

FromMadhya Pradesh

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Kirti Dalvi

FromMaharashtra

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All of us came togetherfor Prof. N .K. Gupta

Presentation

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Innovative Products

y Weather Derivatives

y Terror Futures

y Volatility Index

y REITS

y FIDEMAccount

y Equity Insurance

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Introduction to Weather Derivatives

Weather derivatives are financialinstruments that can be used by organizations orindividuals as part of a risk management strategy to

reduce risk associated with adverse or unexpectedweather conditions. The difference fromother derivatives is that the underlying asset(rain/temperature/snow) has no direct value to price

the weather derivative.

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Weather Derivatives

y Farmers can Hedge when they have poor crops

y Insure crops against rainy weekends in summers

y Gas and Power companies use HDD and CDD

y Sport event managing company can hedge

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Innovative Products

y Weather Derivatives

y Terror Futures

y Volatility Index

y REITS

y FIDEMAccount

y Equity Insurance

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Real estate Investment trust

ORI GI N DATE BACK TO THE 1880S

A TAX DESIG NATION FOR A CORPOR ATION

REQUI RED TO DI STRI BUTE 90% OF THEI R

I NCOME

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Types of REITs

y EquityREITs

y Mortgage REITs

y Hybrid REITs

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ASIAPACIFIC TRANSACTION BY VOLUMEAND SECTOR

OFFICE , 31%

RETAIL, 22%INDUSTRIAL, 10%

MIXED, 11%

RESIDENTIAL, 13%

OTEL, 3% OT

ERS, 10%

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COUNTRY OFFI

CE

INDUST

RIAL

RETA

IL

DIVERSI

FIED

SPECIALI

ZED

HOTE

LS

HEALTH

CARE

RESIDEN

TIAL

UNITED STATES 17 7 25 7 13 8 6 17

UNITED

KINGDOM

18 5 74 1 2 0 0 0

SINGAPORE 16 19 55 0 6 0 0 4

JAPAN 64 2 14 3 0 1 0 16

HONG KONG 29 54 0 5 12 0 0 0

AUSTRALIA 22 16 54 5 2 1 0 0

NEW ZEALAND 46 15 27 3 9 0 0 0

CANADA 13 14 41 0 11 0 5 16

SOUTH KOREA 67 0 0 33 0 0 0 0

COUNTRY WISE PROPERTYSPLIT (%)

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No. Of REITs

Countries Dec-09 Jun-08 Jun-07 Jun-06

America 142 148 169 253

United Kingdom 20 19 14 N/A

Hong Kong 7 7 7 4

Singapore 20 20 16 11

Japan 41 42 41 38

Germany 4 2 N/A N/A

Australia 57 64 58 58

New Zealand 8 8 10 6

Canada 30 33 26 33

South Korea 3 6 6 11

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Innovative Products

y Weather Derivatives

y Terror Futures

y Volatility Index

y REITS

y FIDEMAccount

y Equity Insurance

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y 24 Hour market

y

Highly robust

y Avg. daily turnover USD 3 trillion per day

y High currency volatility

y Fine pricing/Super-fast quotes

Forex Market

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y 9 to 5 market

y Limited market makers

y Avg. daily turnover USD 48 billion

- Merchant 13 bln

- Interbank 35 bln

y RBI close overview

Indian Forex Market

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y ADR

y GDR

y FCCB

y FCEB

y ECB

Instruments

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y Introduced to the financial markets in 1927y Are bought and sold on American markets just like

regular stocksy Each ADR Represents Some Number OfShares OfUnderlying Stock

y E.g. Infosys Issued 2 ADRs For Each Share In IndianStock Market

y Level 1 - Most Basic TypeLevel 2 - Slightly more requirements than Level1Level 3 Most Prestigious

AMERICAN DEPOSITORY RECEIPTSAMERICAN DEPOSITORY RECEIPTS

(ADRS)(ADRS)

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y Deposit Agreement

y Lesser Reporting Requirements As Compared ToSecurities Exchange Commission Of USA

y Used as Currency for Mergers and Acquisitionsy Institutional Investors can Buy

y Payment of Dividends in the GDR Currency

y T+3 settlement

y More than 900 GDRs listed on exchangesworldwide, with more than 2,100 issuers from

80 countries.

GLOBAL DEPOSITORY RECEIPTS (GDRS)GLOBAL DEPOSITORY RECEIPTS (GDRS)

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y Debt instruments - convertible into equity of the company

y Both FDI and ECB policies are applicable

y

Coupon rate must not exceed 300 basis points over SBI PLR

y RBI approval

y Restriction on use of proceeds

y Proceeds to be parked abroad till required in India

y Preferred by companies for raising funds for overseas expansionsand acquisitions

Foreign Currency Convertible Bonds

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FCEB Scheme was notified on February 15, 2008

A security offered by an issuing company and subscribed to

by investors living outside India and exchangeable intoequity shares of another company, which is called theoffered company.

Issuing Company must - Part of the promoter group &hold

the equity shares

Offered Company - Listed company

Foreign Currency

Exchangeable Bonds

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y Permitted by the Govt. as an additional source of fundsto Indian Corporate

y

Borrower can access ECB under two routes, namelythe automatic route and the approval route

y Under the automatic route up to US $ 500 million in afinancial year

y Under the Approval route above US $ 500 million in afinancial year

External Commercial

Borrowings