V.E.S College of Arts, Science and Commerce .

American Depositary Receipt & Global Depository Receipt

Group members:-

A DR is a type of negotiable (transferable) financial security traded on a local stock exchange but represents a security, usually in the form of equity, issued by a foreign, publicly-listed company.
The DR which is a physical certificate, allows investors to hold shares in equity of other countries.

TYPES OF DEPOSITORY RECEIPTS

ADR

American DRs

GDR
European DRs

Global DRs

International DRs

LISTED ON
AMERICAN DEPOSITORY RECEIPT (ADR) GLOBAL DEPOSITORY RECEIPTS (GDR)

US National Stock exchange

New York Stock exchange (NYSE) or American stock exchange

European Stock exchange London Stock exchange

 An American depositary receipt (ADR) is a negotiable security that

represents securities of a non-US company that trade in the US financial markets. Securities of a foreign company that are represented by an ADR are called American depositary shares (ADSs). ADRs are denominated and pay dividends in US dollars.

Types of ADR
Types of ADRs

Unsponsored

Sponsored

Level I

Level II

Level III

Private placement

Level I
Least Expensive

Level II
More Expensive

Level III
Most Expensive

Full SEC registration & SEC reporting is Minimal SEC registration reporting more detailed &reporting requirements. requirements. than Level II. Listed on National Cannot be listed on exchange of US.NYSE, National exchange of US. NASDAQ, AMEX. Capital Raising is not permitted. Capital Raising is not permitted. Listed on National exchange of US. Capital can be raised through Public offering.

Restricted Programs
Foreign companies that want their stock to be limited to being traded by only certain individuals may set up a restricted program.

Offshore (SEC Regulation S) ADRs

The other way to restrict the trading of depositary shares to US public investors is to issue them under the terms of SEC Regulation S. This regulation means that the shares are not, and will not be registered with any United States securities regulation authority.

Sourcing ADRs
In case of trading in ADRs of UK companies where creation of new ADRs attracts a 1.5% SDRT charge by the UK government.

ADR termination

The termination can be at the discretion of the foreign issuer or the depository bank, but is typically at the request of the issuer.

What types of companies issue ADRs?

Any non-U.S company seeking to engage the US market to diversify its investor base, raise capital in the U.S or offer US-type employee plans.

What are the benefits of ADRs for U.S. investors?

ADR holders also appreciate dollar dividend payments and receiving corporate action notifications.

Advantages of ADR
An easy and cost effective way to buy shares of a foreign company.

The purchaser has a theoretical right to exchange shares.

Meaning:Global Depository Receipt or simply GDRs, are traded instead of the original share on exchange worldwide.

Definition of GDRs
GDRs mean global depository receipts. It is negotiable and transferable from one body to another. It also evidence ownership of a companys shares.

Importance of GDRs
If any company gets GDRs for his purchased shares, then these can be sold in any stock market of world through global network of banks and financial institutions.

Advantages of GDR
GDR allows investors to invest in foreign companies without any foreign trading practices, laws. Easier trading, payments of dividends are in the GDR currency.

However, they have foreign exchange risk i.e. currency of issuer is different from currency of GDR.

Difference Between ADR & 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

Indian company using ADR & GDR

COMPANY
Bajaj Auto Dr. Reddys HDFC Bank

ADR
NO

GDR
YES

YES
YES NO YES

YES
YES YES YES

Hindalco
ICICI Bank

Infosys Technologies ITC

L &T MTNL

YES
NO NO YES YES NO YES NO YES YES

YES
YES YES YES NO YES NO YES YES YES

Patni Computers
Ranbaxy Laboratories Tata Motors State Bank of India VSNL WIPRO

Thank You !