Disha Exports Ltd., engaged in garment exports, has proposed to expand its operations for which it requires funds of $5 million, net of issue expenses amounts to 2% of the issue size. It has planning to raise the funds t

Calculations for Disha Exports Ltd. Expected domestic price per share = ₹300 10% Discount on Market Price = ₹300 * 10% = ₹30 Discounted Market Price = ₹300 - ₹30 = ₹270 Price of each GDR (in ₹) = ₹270 * 4 shares/GDR = ₹1,080 Expected domestic price per GDR (in $) = ₹1,080 / ₹45/$ = $24 (a) Computation of the number of GDR to be issued: Amount to be raised (gross) = $5 Million / (1 - 0.02) = $5 Million / 0.98 = $5.10204 million Number of GDRs to be issued = $5.10204 million / $24 per GDR = 2,12,585 GDRs (b) Computation of the cost of GDR to the company: Cost of GDR (K gdr ) = [D 1 / (P 0 * (1 - f))] + g Where: D 1 = Expected dividend per GDR P 0 = Price of GDR (net of flotation cost) f = Flotation cost of issuing GDR (as a percentage) g = Growth rate Expected Dividend per share = 20% of Face Value (assuming face value is ₹45, or if 20% is dividend yield on market price, then it's 20% of ₹45. Let's assume 20% of the underlying share price of ₹45, as per typical dividend calculations in such problems, or it could be 20% of the price per share in dollar terms. The solution uses ₹45 * 0.20 = ₹9. This implies ₹45 is the dividend per share in domestic currency, and 20% is the payout ratio or dividend rate. Given the context, it's likely 20% of the underlying share price in dollar terms converted to INR, or 20% of the expected domestic price per share. The solution uses ₹45 as the base for dividend calculation, which is the exchange rate. This is unusual. Let's follow the provided solution's calculation for D1.) Expected Dividend (D 1 ) = ₹45 (exchange rate) * 0.20 = ₹9 (This interpretation of D1 is based on the provided solution, which is unusual as dividend is usually a percentage of face value or market price, not exchange rate.) Price of GDR (P 0 ) = ₹1,080 Flotation cost of issuing GDR (f) = 2% Growth rate (g) = 10% = 0.10 Cost of GDR = [₹9 / (₹1,080 * (1 - 0.02))] + 0.10 = [₹9 / (₹1,080 * 0.98)] + 0.10 = [₹9 / ₹1,058.4] + 0.10 = 0.0085 + 0.10 = 0.1085 or 10.85%