VVG Reddy is an NRI based in Dubai and is the vice-president of AL-SAR traders. He has 2000 shares of the company and the base value of dollar 100 per share and the listed price for the share today in Dubai stock exchange is dollar 175.
Recently he has shifted base to Mumbai and has decided to sell the shares. He approaches a stock broker Mr.Lakshmi Parayan who gave him some insight into the ways the share could be traded.
The share broker said that there are four ways in which the trading could be done. The broker can buy the share immediately at 20 percentage less than the dollar exchange rates with 22 percent tax on the earnings. The shares could be routed through the New york stock exchange in which case the transaction would take six months to complete where in the dealer commission would be 4 percent and the exchange rate would be 15 percent less than the dollar exchange rates and the tax would be 2 percent in India and 3 percent in New York.. the third option would be to sell in the Dubai market where only 500 shares can be traded a month at 6 percent less than the dollar exchange rate with 7 percent tax and 6 percent dealer commission for every 500 shares. The fourth option would be to sell the shares through local traders who will only deal with 100 shares every month at 15 percent less than dollar exchange rates with 3 percent dealer commission.
Discuss the best option for Reddy that will give him best returns,
Assume dollar exchange rate as Rupees 65 per dollar and interest rates at 15 % per anum.
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