4 Different Forms of Euro Equity Issue:

Global Depository Receipts (GDR)

American Depository Receipts (ADR)- #Popular

European Depository Receipts- #Popular

Singapore Depository Receipts

It’s just that the name differs but the features are identical for these equities confirming norms and rules
pertaining to respective countries where these are issued and listed.

#1: Global Depository Receipts (GDR)

GDR equity shares are denominated in dollar and tradable on a stock exchange in Europe or USA. For
example, a GDR of $100 may comprise of 2 equity shares of $50 each amounting to whatever the
prevailing exchange rate is.

Main features of GDR:

GDR represents certain number of equity shares denominated in dollar terms

The issuer collects the proceeds in foreign currency

GDRs are traded on stock exchanges of Europe and USA

And funds are raised from foreign capital market of the USA and Europe

All shares to be issued are deposited with an intermediary called ‘depository’ located in the listing
country

The Depository issues a receipt against these shares

Each receipt has a fixed number of shares usually 2 or 4

The shares issued to the depository may be in physical possession of another

Intermediary called ‘custodian’ who acts as depositor’s agent.

The equity shares registered in the name of depository are then issued in form of GDR to the investors of
that foreign country
The GDR does not appear in the books of the issuing company

ADR or GDR holders do not have voting rights and therefore not bound by strict definition of foreign
ownership

Two-way fungibility is permitted in GDRs whereby they are freely convertible into Shares and back into
GDRs without restriction to the extent of the original issue size.

The issue of GDR is governed by international laws

Since GDR is also denominated in rupees, hence, GDR does not carry any exchange risk as its face value
is protected against the exchange risk

GDRs are listed at Luxembourg and traded at two other stock exchanges namely,

The OTC market in London and in the USA by private placement

NRIs and foreign residents can buy GDR by using their regular share trading account

Still not clear? Don’t hesitate to write to MUDS at services@muds.co.in or call MUDS at 9911222771 for
Free Consultation !

#2: American Depository Receipts (ADR)

Devised in the late 1920s to help Americans invest in overseas securities. The main reason for
introducing ADRs were the complexities involved in buying shares in foreign countries and the difficulties
associated with trading at different prices and currency values.

GDR v/s ADR:

There is not much different between GDR and ADR. Few of the differences includes- GDR can be issued
in the USA and other European countries. It is listed on the stock exchanges of USA and Luxembourg.

Whereas, ADRs are denominated in US dollars, issued and traded on USA USA stock exchange only.

Procedural Requirements for a GDR/ADR

Legal and accounting due diligence on Issuer in lines of the GAAP accounting principals accepted in the
US

Authorization by the shareholders

Application for listing the additional shares on the Indian Stock Exchange

Filing

Facilitate and arrange Legal and Accounting Due Diligence on the Issuer

Approval of the Foreign Investment Promotion Board (‘FIPB’)

Like ADR and GDR there are”Other depository receipts” depending on the country where it’s issued.
Euro

equity issued in European countries is called as European Depository Receipts (EDRs) #3

In Singapore is called as Singapore Depository Receipts #4

Debts raised in form of bonds from international capital complying to regulations of the respective
country is called as Euro Debt.

Still not clear? Don’t hesitate to write to MUDS at services@muds.co.in or call MUDS at 9911222771 for
Free Consultation !

Types of Euro Debt

External Commercial Borrowings (ECB)

Foreign Currency Convertible Bonds (FCCB)- #Popular

Foreign Currency Exchangeable Bonds (FCEB)

Euro Bonds

Foreign Currency Convertible Bonds (FCCB)

Foreign currency convertible bond (FCCB) is a convertible bond issued by an issuer company in a country
whose currency different from its own currency. A company can raise funds in the form of foreign
currency by this instrument.

FCCB are bonds issued in accordance with the scheme defined by Ministry of Finance, Government of
India.
Salient features of FCCB:

The bonds are issued in a currency different from that of the issuing country for the purpose of
fundraising.

FCCBs can be subscribed by a non- resident in foreign currency

They collectively act like debt and equity instruments whereby regular payment of interest and a
principal payment on maturity is made.

At the same time, these bonds also give the bondholder the choice to convert them into ordinary shares,
either in whole or in part.