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AMERICAN DEPOSITARY

RECEIPTS AND GLOBAL


DEPOSITORY RECEIPTS

PRESENTED BY
KIRTI GARG
ABOUT ADR…
ADRs first introduced in 1927.
 ADR is a security issued by a company outside the U.S.
which physically remains in the country of issue
,but usually in the custody of a bank, is traded on U.S.
stock exchanges. For the American public ADRs
simplify investing. So when Americans purchase Infy (the
Infosys Technologies ADR) stocks listed on Nasdaq, they
do so directly in dollars, without converting them from
rupees.   
ADR’s basically used by Non Resident Indians (NRIs)
and non-Indians for making investments in India
American Depository Receipt
Domestic Stock
Exchange U.S.
AMERICA

CERTIFICATE
SHARES

Thus, ADR is a negotiable U.S. certificate representing


ownership of shares in an non-US corporation. ADR’s are
quoted and traded in U.S. Dollars in the US securities
market. Also, the dividends are paid to investor in US dollars.

ADRs were specifically designed to facilitate the purchase,


holding and sale of non-US securities by US investor, and to
provide a corporate finance vehicle for non-US companies.
Specimen Of ADR …
Global Depositor y reciepts
These are similar to the ADR but are  usually listed on
exchanges outside the U.S., such as Luxembourg or London If
the depository receipt is traded in a country other than USA, it
is called a Global Depository Receipt, or a GDR. Thus GDR
is a negotiable certificate held in the bank of one country
representing a specific number of shares of a stock traded on
an exchange of another country. To raise money in more than
one market, some corporations use global depositary receipts
(GDRs) to sell their stock on markets in countries other than
the one where they have their headquarters.
The GDRs are issued in the currency of the country where the
stock is trading.
PROCESS OF ADR/GDR
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 receipts 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 called Depository
Receipts. 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.
Process for ADR/GDR…
DOMESTIC CUSTODIAN Releases Equity Shares
BANK
Has a custody of Indian
INDIAN COMPANY
company equity shares

Requests the bank Gives Instructions to


to release of equity Issue ADRs/ GDRs
Shares
OVERSEAS
DEPOSITORY BANK

Requests for Issue


buying ADR/GDR ADRs/GDRs

INVESTORS
Some Major ADRs issued by
Indian Companies
Among the Indian ADRs listed on the US markets, are
 Infy (the Infosys Technologies ADR), 
WIT (the Wipro ADR), 
Rdy(the Dr Reddy’s Lab ADR), and
 Say (the Satyam Computer ADS)
 
Some Major GDRs issued by
Indian Companies
Dr. Reddys L&T

HDFC Bank MTNL

Hindalco Ranbaxy Laboratories

ICICI Bank State Bank of India

Infosys Technologies VSNL

ITC WIPRO
Benefits Of ADR/GDR For…
COMPANIES INVESTOR

•Broadening and diversifying a •Convenient to purchase and hold


company’s investor base. other countries securities.

•Enhancing a company's visibility, •Opportunity to earn & invest in other


status and profile in the other currencies
countries among investors
•Diversifying portfolio
•Offers a new avenue for raising
equity capital , often at highly •Invest in high growth economies.
competitive rates.
ADR VS GDR…
Basis of ADR GDR
comparison

Centre The NYSE which is the The LSE Is not as large as


largest stock exchange In the NYSE overall, but Is the
the world is where the global centre for
ADR is traded. International equities,
which dominate In
Turnover.

GAAP Foreign companies listing LSE satisfied with a statement


in the US must of the
reconcile their accounts to difference between the UK
US GAAP. and Indian
Accounting standards
Basis of ADR GDR
comparison

Retail A public offering in the GDR is Issued only to


US allows an issuer to QIBs but ordinary
access the US retail investors cannot
market. This provides participate.
extra source of demand.

Liability Legal liability of both a Legal liability of a


company and its company and its
individual directors directors is less than in
increased by a full US the case of an
listing. ADR.
Basis of ADR GDR
comparison

Cost US listing could be GDR listing on the LSE is


expensive. Total initial costs comparatively
likely to be in the range of Inexpensive. Initial costs
US $10,00,000 likely to be in
to US $20,00000 the range US $2,00,000 to
US $4,00,000.
THANK YOU
FOR
LISTENING!!!!

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