AMERICAN DEPOSITARY RECEIPTS AND GLOBAL DEPOSITORY RECEIPTS : AMERICAN DEPOSITARY RECEIPTS AND GLOBAL DEPOSITORY RECEIPTS PRESENTED

BY KIRTI GARG ABOUT ADR : 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. ADRs basically used by Non Resident Indians (NRIs) and non-Indians for making investments in India American Depository Receipt : American Depository Receipt Thus, ADR is a negotiable U.S. certificate representing ownership of shares in an nonUS corporation. ADRs 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. Domestic Stock Exchange SHARES U.S. AMERICA CERTIFICATE Specimen Of ADR : Specimen Of ADR Global Depositor y reciepts : 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 : 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 : Process for ADR/GDR Releases Equity Shares Issue ADRs/GDRs Gives Instructions to Issue ADRs/ GDRs Requests for buying ADR/GDR Requests the bank to release of equity Shares Some Major ADRs issued by Indian Companies : 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 Reddys Lab ADR), and Say (the Satyam Computer ADS) Some Major GDRs issued by Indian Companies : Some Major GDRs issued by Indian Companies Dr. Reddys HDFC Bank Hindalco ICICI Bank Infosys Technologies ITC L&T MTNL Ranbaxy Laboratories State Bank of India VSNL WIPRO Benefits Of ADR/GDR For : Benefits Of ADR/GDR For ADR VS GDR : ADR VS GDR