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This article explains what ADRs and GDRs are, and how they can be used by Non Resident
Indians (NRIs) and non-Indians for making investments in India.
India is hot these days ± all major brokerages are of the opinion that India has a great long term
potential, and that investors in India would reap handsome benefits in the next 10 years.
With the current correction in the Indian stock market, the valuations have become even
better. And the logic of investing in Indian equity market has become even more
compelling.

This is great for people living in India ± they can invest in variousmutual funds (MFs),
or can choose some great companies and invest in those. (Confused if you should
invest in stocks directly or through mutual funds? Please read ³à
   


    £)

But what about Non Resident Indians (NRIs) and foreign nationals? Considering the
many restrictions on NRIs and foreign nationals investing in India, how can they benefit
from the potential that India offers?

There are some very good proxies to investing directly in India ± and ADRs and GDRs
are a great option.

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ADR stands for p



 

 . Similarly, GDR stands for 




 

 . Let¶s understand these better.

Every publicly traded company issues shares ± and these shares are listed and traded
on various stock exchanges. Thus, companies in India issue shares which are traded on
Indian stock exchanges like BSE (The Stock Exchange, Mumbai), NSE (National Stock
Exchange), etc.

These shares are sometimes also listed and traded on foreign stock exchanges like
NYSE (New York Stock Exchange) or NASDAQ (National Association of Securities
Dealers Automated Quotation).

But to list on a foreign stock exchange, the company has to comply with the policies of
those stock exchanges. Many times, the policies of these exchanges in US or Europe
are much more stringent than the policies of the exchanges in India. This deters these
companies from listing on foreign stock exchanges 
 .
But many good companies get listed on these stock exchanges
 ± using ADRs
and GDRs.
This is what happens: The company deposits a large number of its shares with a bank
located in the country where it wants to list indirectly. The bank issues 

  against
 these shares, each receipt having a fixed number of shares as an underlying (Usually 2
or 4).

These receipts are then sold to the people of this foreign country (and anyone who is
allowed to buy shares in that country). These receipts are listed on the stock
exchanges. They behave exactly like regular stocks ± their prices fluctuate depending
on their demand and supply, and depending on the fundamentals of the underlying
company.

These receipts, which are traded like ordinary stocks, are calledà 
 .
Each receipt amounts to a claim on the predefined number of shares of that company.
The issuing bank acts as a depository for these shares ± that is, it stores the shares on
behalf of the receipt holders.

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Both ADR and GDR are depository receipts, and represent a claim on the underlying
shares. The only difference is the location where they are traded.

If the depository receipt is traded in the United States of America (USA), it is called
an p



 

 , or an ADR.
If the depository receipt is traded in a country other than USA, it is called a 




 

 , or a GDR.
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ADRs and GDRs are not for investors in India ± they can invest directly in the shares of
various Indian companies.

But the ADRs and GDRs are an excellent means of investment for NRIs and foreign
nationals wanting to invest in India. By buying these, they can invest directly in Indian
companies without going through the hassle of understanding the rules and working of
the Indian financial market ± since ADRs and GDRs are traded like any other stock,
NRIs and foreigners can buy these using their regular equity trading accounts!

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Some of the best Indian companies have issued ADRs and / or GDRs. Below is a partial
list.

0
 p


Bajaj Auto No Yes
Dr. Reddys Yes Yes
HDFC Bank Yes Yes
Hindalco No Yes
ICICI Bank Yes Yes
Infosys Technologies Yes Yes
ITC No Yes
L&T No Yes
MTNL Yes Yes
Patni Computers Yes No
Ranbaxy Laboratories No Yes
Tata Motors Yes No
State Bank of India No Yes
VSNL Yes Yes
WIPRO Yes Yes