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ADR & GDR

PRESENTED BY:
YASHAL SHAH
DHAVAL KARIA
VRUTANT VAKHARIA
VISHAL JHAMNANI
VIDYALAKSHMI SHARMA
ABHIMANYU SHRIVASTAV

TABLE OF CONTENTS

DEPOSITORY RECEIPTS
AMERICAN DEPOSITORY RECEIPTS (ADR)
PROCESS TO ISSUE ADR/GDR
ADVANTAGES OF ADR
TYPES OF ADR
LEVELS OF ADR
GLOBAL DEPOSITORY RECEIPTS (GDR)
TYPES OF GDR
DIFFERENCE BETWEEN ADR & GDR
EXAMPLES OF ADR & GDR

DEPOSITORY RECEIPTS
Depository receipts are instruments issued by
international depositories (ODB), and they
represent an interest in the underlying shares
held by them in the issuer company (Indian
Company). The shares are usually held by a
domestic custodian on behalf of the depositories
in turn issue the depository receipts, which entitle
the holder of the receipts to get the underlying
shares on demand.

DRs are traded on Stock Exchanges in the US,


Singapore, Luxembourg, London, etc.
DRs listed and traded in US markets are known as
American Depository Receipts (ADRs) and those
listed and traded elsewhere are known as Global
Depository Receipts (GDRs). In Indian context,
DRs are treated as FDI

INTERNATIONAL CAPITAL MARKET

INTERNATIONAL BOND MARKET

EURO
BOND

FOREIGN
BOND

INTERNATIONAL EQUITY MARKET

GDR

ADR

AMERICAN DEPOSITORY RECEIPTS


ADR is a dollar-denominated negotiable
certificate. It represents a non-US companys
publicly traded equity. It was devised in the late
1920s to help Americans invest in overseas
securities and to assist non-US companies
wishing to have their stock traded in the
American Markets.
ADR were introduced as a result of of the
complexities involved in buying shares in foreign
countries and the difficulties associated with
trading at different prices and currency values.

PROCESS TO ISSUE ADR/GDR

Issuing
Company
(RIL)
Foreign
Depository
(Morgan
Stanley)
Clearing
Agency
(Euro Clear)

Share
certificate
confirmation
Issue of DR

Payment
Dividend

Domestic
Custodian
bank
(SBI)
GDR/ADR
Holders
(Bank Of
America)
Foreign Stock
Exchange
(NYSE)

ADVANTAGES OF ADR/GDR
Can be listed on any of the overseas stock
exchanges /OTC/Book entry transfer system.
Freely transferable by non-resident.
They can be redeemed by ODB.
The ODB should request DCB to get the
corresponding underlying shares released in favor
of non resident of investors. (Shareholders of
issuing companies).

TYPES OF ADR

SPONSORED ADR

UNSPONSORED ADR

Issued with cooperation


of the company whose
stock will underlie the
ADR

Issued by broker/dealer
or depository bank
without the involvement
of company whose stock
underlies the ADR

Comply with regulatory


reporting.

No regulatory reporting

Listing on international
StockExchanges allowed.

Trade on OTC market

LEVELS OF ADR
Level 1- Level 1 depositary receipts are the lowest level of
sponsored ADRs that can be issued. When a company issues
sponsored ADRs, it has one designated depositary who also
acts as its transfer agent.
Level 1 shares can only be traded on the OTC market and the
company has minimal reporting requirements with the U.S.
Securities and Exchange Commission [SEC].
Level 2- Level 2 depositary receipt programs are more
complicated for a foreign company. When a foreign company
wants to set up a Level 2 program, it must file a registration
statement with the U.S. SEC and is under SEC regulation.

The advantage that the company has by upgrading their program to


Level 2 is that the shares can be listed on a U.S. stock exchange.
These exchanges include the New York Stock Exchange (NYSE),
NASDAQ, and the American Stock Exchange (AMEX).
Level 3- A Level 3 American Depositary Receipt program is the
highest level a foreign company can sponsor. Because of this
distinction, the company is required to adhere to stricter rules that
are similar to those followed by U.S. companies.
Foreign companies with Level 3 programs will often issue materials
that are more informative and are more accommodating to their U.S.
shareholders because they rely on them for capital

GLOBAL DEPOSITORY RECEIPTS


A bank certificate issued in more than one country
for shares in a foreign company. The shares are held
by a foreign branch of an international bank. The
shares trade as domestic shares, but are offered for
sale globally through the various bank branches.
A financial instrument used by private markets to
raise capital denominated in either U.S. dollars or
Euros.
The voting rights of the shares are exercised by the
Depository as per the understanding between the
issuing company and the GDR holders.

TYPES OF GDR
Rule 144A GDRs
Rule 144A GDRs are privately placed depositary
receipts which are issued and traded in accordance
with Rule 144A. This rule was introduced by the
SEC in April 1990 in part to stimulate capital raising
in the US by non-US issuers.
Non-US companies now haveready access to the
US equity private placement market and may thus
raise capital through the issue of Rule 144A GDRs
without complying with the stringent SEC
registration and reporting requirements.

Regulation S
With the global integration of the major securities
markets, it is now commonplace to have fungible
securities listed and cleared in more than one
market.
Just as ADRs allow non-US issuers to access the
important US market, GDRs allow issuers to tap
the European markets.

DIFFERNCE BETWEEN ADR & GDR


ADR

GDR

American depository receipt


(ADR) is compulsory for non us
companies to trade in stock
market of USA.

Global depository receipt (GDR)


is compulsory for foreign
company to access in any other
countrys share market for
dealing in stock.

ADRs can get from level 1 to


level III.

GDRs are already equal to high


preference receipt of level II and
level III.

ADRs up to level I need to


accept only general condition of
SEC of USA.

GDRs can only be issued under


rule 144 A after accepting strict
rules of SEC of USA .

ADR is only negotiable in USA .

GDR is negotiable instrument all


over the world

Investors of USA can buy ADRs


from New york stock exchange
(NYSE) or NASDAQ

Investors of UK can buy GDRs from


London stock exchange and
luxemberg stock exchange and invest
in Indian companies without any

WHICH INDIAN COMPANIES HAVE


ADR & GDR
COMPANY

ADR

GDR

Bajaj Auto

No

YES

Dr Reddys

YES

YES

HDFC Bank

YES

YES

ICICI bank

YES

YES

ITC

NO

YES

L&T

NO

YES

MTNL

YES

YES

HINDALCO

NO

YES

INFOSYS
TECHNOLOGIES

YES

YES

TATA MOTORS

YES

NO

COMPANIES

ADR

GDR

PATNI COMPUTERS

YES

NO

SBI

NO

YES

WIPRO

YES

YES

VSNL

YES

YES

THANK YOU