American depositary receipts of Infosys Technologies, Dr Reddy's Laboratories and Satyam Computer are likely to benefit from US president George Bush's proposal to eliminate dividend tax.

However, ADRs of Indian companies not paying taxes in the US are likely to witness a decline in investor interest if the current US administration succeeds in its move.

Currently, 10 Indian companies have their depository receipts listed on the US exchanges, primarily the New York Stock Exchange and the Nasdaq.

These include Infosys Technologies, Wipro, ICICI, Satyam, Rediff.com, Silverline Industries, HDFC Bank, VSNL, MTNL and Dr Reddy's Laboratories.

The Bush plan is designed to ensure that US-listed foreign businesses stand to benefit only to the extent that they post earnings and pay taxes in the US.

Investors in ADRs of companies with significant US operations will be able to reduce their dividend tax burden through 'a simple mathematical formula' that tracks the percentage of income on which a company has already paid US taxes.

But investors in ADRs of companies that earn money only in their home markets or regions would see no benefit from the rule change.

For Infosys, US accounts for a large part of the foreign taxes paid by it. In the year ended March 2002, Infosys had paid foreign taxes to the tune of $21,436,511.

"This situation may lead to a shift in investor preference in favour of ADRs of companies having business presence in US over ADRs of companies having business in non-US market," a custodian cautioned.

However, the extent of benefit to the Indian companies paying taxes in the US was not immediately available.

The US administration plan is designed to ensure that taxes on corporate income are paid only once, either by companies or investors, and not twice.