Kothari Pioneer Asset Management's penchant for American Depository Receipts of Indian companies continues with the mutual fund investing in the ADS of Wipro Technologies. The ADS was listed on the New York Stock Exchange in mid-October. The AMC's four funds bought 1.2 lakh ADS of the IT major during its initial primary offer or IPO last month. Thus, the funds were able to corner over 4 per cent of the total ADS of 27.5 lakh during the public offering. Priced at $41 3/8 per ADS, Kothari Pioneer is assumed to have invested roughly 23 crore through its funds in the IPO. Apart from Internet Opportunities and Infotech, KP Bluechip and Prima Plus have invested in Wipro's ADS. All the four funds have had a significant portion of assets in cash in October.
The decision to invest in the ADS has already reaped some quick rewards for the AMC. In the short span since Wipro ADS was listed, the price has already appreciated to $55.93 or 35 per cent, thus giving a boost to the NAV of these funds. The total investment of the four funds in the ADS stood at Rs 28.70 crore on October 31. The cumulative investment of Kothari funds (including investments in domestic stock of Wipro) was Rs 57 crore on the same date.
"During October, we invested in the ADS issue of Wipro as the issue was attractively priced. We have always liked the fundamentals of the company but stayed away due to valuation concerns,'' says R Sukumar, fund manager, KP Internet Opportunities Fund. ''After Rediff and Wipro, we will be selectively looking at other Indian companies going for listing at Nasdaq. Kothari Pioneer Mutual Fund has obtained RBI permission to invest in ADRs and GDRs of Indian companies and we can invest upto 10 per cent of our total assets under management in ADRs and GDRs,'' says Sukumar.
Earlier this year, Kothari Pioneer's Internet Opportunities Fund has become the first Indian fund to invest in the American Depository shares of an Indian company. The fund participated in the initial primary offering (IPO) of Rediff Communications, which is also the first Indian portal to list on the Mecca of technology stocks - Nasdaq. Rediff had made its debut on Nasdaq on June 13. The Internet Opportunities Fund holds 1.03 lakh ADRs of the company, valued at Rs 2.41 crore as on October 31, 2000.
It may be recalled that the Securities and Exchange Board of India had issued guidelines for investments by Indian mutual funds in ADRs and GDRs in October last year. The market regulator had set an overall limit of $500 million for the industry, while a mutual fund can invest up to 10 per cent of the net assets managed by it, subject to a ceiling of US$50 million.