Global depository receipts

Click to edit Master subtitle style Roll no 15 By Jishad pp

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GDR Global Depositary Receipts

A bank certificate issued in more than one country for shares in a foreign company Offered for sale globally through the various bank branches Shares trade as domestic shares

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GDR CUSTODIAN BANK DEPOSITORY BANK

Custodian Bank located in same country Works with the Depository Bank and follows instructions from the depository bank. Collects, remits dividends and forwards notices received from the depository bank.

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GDR MARKET

GDRs can be created or cancelled depending on demand and suply When shares are created, more corporate stock is placed in the custodian bank in the depositary bank account The depositary bank then issues the new GDRs Factors governing GDR prices are company track record, analysts recommendations, relative valuations, market conditions and also international status of the company

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GDR Listing

London Stock Exchange Luxembourg Stock Exchange DIFX Singapore Exchange Hong Kong Exchange

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GDR- Advantages and Dis-advantages

GDRs allow investors to invest in foreign companies without worrying about foreign trading practices, laws Easier trading, payments of dividends are in the GDR currency GDRs are liquid because they are based on demand and supply which is regulated by creating or cancelling shares GDR issuance provides the company with visibility, more larger and diverse shareholder base and the ability to raise more capital in international markets However, they have foreign exchange risk i.e. currency of issuer is different from currency of GDR

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In Simple terms - ADR / GDR ISSUE COMPANY SHARE

DEPOSITARY BANK

INVESTOR

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Difference between ADR and GDR

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. Depositary receipts traded in USA ADR Depositary receipts traded in a country other than USA - GDR

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India- ADR and GDR

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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Indian Companies using ADR/GDR

COMPANY Bajaj Auto Dr. Reddys HDFC Bank Hindalco ICICI Bank Infosys Technologies ITC L&T MTNL Patni Computers Ranbaxy Laboratories Tata Motors State Bank of India VSNL 3/4/12 WIPRO ADR No Yes Yes No Yes Yes No No Yes Yes No Yes No Yes Yes GDR Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes No Yes Yes Yes