TOPIC :

AMERICAN DEPOSITORY RECEIPT &

GLOBAL DEPOSITORY RECEIPT

• KAJAL AGARWAL_PF1820-D02
• ISHITA GROVER_PF1820-D22
• SACHIN NAHAR_PF1820-D39
• SARTHAK SRIVASTAVA_PF1820-D57
 TOPICS TO BE COVERED

• Concept of ADR
• Process to issue ADR
ADR • Types of ADR & its advantages
• Levels of ADR

• Concept of GDR
• Process to issue GDR
GDR •
•
GDR Market and its Listings
Types of GDR Market
• Advantages of GDR

• Difference between ADR & GDR

CONCLUSION • Case based Example
• Conclusion
 INTERNATIONAL CAPITAL MARKET

International
Capital Market

International International
Bond Market Equity Market

EURO Bond FOREIGN Bond ADR GDR

Source: Investopedia
 INTERNATIONAL EQUITY MARKET

CONCEPT OF adr? AMERICAN DEPOSITORY

RECEIPT
A negotiable certificate issued by a
U.S. bank.

ADR’s are denominated in U.S. Dollar

It represents a specified number of

shares of a foreign company

ADRs were introduced as a result of

the complexities involved in buying
shares in foreign countries and the
difficulties associated with trading at
different prices and currency values

Source: Investopedia
 PROCESS TO ISSUE ADR

Share Certificate
Issuing Company Domestic Custodian Bank
(RIL) (SBI)

Foreign Depository Issue of ADR ADR Holders

(Morgan Stanley) (Bank of America)

Clearing Agency Foreign Stock Exchange

(Euro Clear) (NYSE)

Source: Investopedia
 TYPES OF ADR & ITS ADVANTAGES

Advantages:
• It is an easy and cost effective way to buy
ADR •
shares of a foreign company.
Reduces administrative costs and avoids
foreign taxes on every transaction.
• Any foreigner can purchase these
Unsponsored Sponsored securities.
ADR AD • The purchaser has a theoretical right to
exchange shares ( non- voting right shares
for voting rights)
 LEVELS OF ADR

LEVEL 1 ADR LEVEL II ADR LEVEL III ADR

• They are the lowest level of • Level II ADRs enable
sponsored ADRs and also the • Level III ADR allows the
simplest method for companies
companies to list their ADRs issuer to raise capital and
to access the US capital on Nasdaq, the American leads to much greater
markets. Stock Exchange, the New visibility in the U.S market.
• They are traded in the over-the
York Stock Exchange and the
• Level III ADR programs
–counter (OTC) market. OTC bulletin board, thereby
must comply with various
offering higher visibility in
• Level 1 ADRs essentially enable SEC rules, including the full
a company to obtain the the US market, more active
registration and reporting
benefits of a US publicly traded trading and greater liquidity.
requirements of the SEC's
security without altering their Exchange Act.
current reporting process.

Source: Investopedia
 GLOBAL DEPOSITORY RECEIPT

• CONCEPT OF gdr? GLOBAL DEPOSITORY

RECEIPT
It’s 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.
 PROCESS TO ISSUE GDR

Share Certificate
Issuing Company Domestic Custodian Bank
(RIL) (SBI)

Foreign Depository Issue of GDR ADR Holders

(Morgan Stanley) (Bank of America)

Clearing Agency Foreign Stock Exchange

(Euro Clear) (NYSE)

Source: Investopedia
 GDR MARKET AND ITS LISTING

• GDRs can be created or cancelled

depending on demand and supply.
• When shares are created, more corporate
GDR LISTING
stock is placed in the custodian bank in the
depositary bank account London Stock Exchange
• The depositary bank then issues the new
GDRs Luxembourg Stock Exchange
• Factors governing GDR prices are
“company track record, analysts DIFX
recommendations, relative valuations,
market conditions and also Singapore Exchange
international status of the company”.
Hong Kong Exchange
 TYPES OF GDR MARKET

Rule 144A GDRs

Rule 144A GDRs are privately placed depositary receipts which are issued and traded in
accordance with Rule 144A.
Non-US companies now have ready 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.
ADVANTAGES OF GDR

GDRs allow investors to

invest in foreign companies
without worrying about
foreign trading practices
Easier trading, payments of
dividends are in the GDR
currency

GDRs are liquid

GDR issuance provides the

company with visibility, more
larger and diverse
shareholder base
MAJOR INDIAN COMPANIES DEALING WITH ADR
&GDR
COMPANY ADR GDR
Bajaj Auto No YES
Dr Reddy’s 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
PATNI COMPUTERS YES NO
SBI NO YES
WIPRO YES YES
VSNL YES YES
 DIFFERENCE BETWEEN ADR &GDR

ADR GDR
American depository receipt (ADR) is Global depository receipt (GDR) is
compulsory for non –us companies to trade compulsory for foreign company to access in
in stock market of USA. any other country’s 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 GDRs can only be issued under rule 144 A
general condition of SEC of USA. 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 Investors of UK can buy GDRs from London
york stock exchange (NYSE) or NASDAQ stock exchange and Luxemburg stock
exchange and invest in Indian companies
without any extra responsibilities .
 CASE DETERMINING THE WORKING OF
ADR & GDR
LETS TAKE AN EXAMPLE OF INFOSYS:-
• Suppose price of Infosys share in stock market is around Rs. 2000.
• Lets assume for simplicity, $1= Rs 40.
• Now a US bank purchases 10000 shares of Infosys and issues them
in US in the ratio of 10:1
• This means each ADR purchased is worth 10 Infosys shares.
• Quick calculation means 1 ADR = US $400
• Once ADR are priced and sold, its subsequent price is determined
by supply and demand factors, like any ordinary shares.
 ADR/GDR RATIO
Single
1 ADR = 1 SHARE
ADR Ratio = 1:1

Multiple
1 ADR = 5 SHARES
ADR Ratio = 1:5

Fraction
1 ADR = ½ SHARE
ADR Ratio = 2:1
CONCLUSION
THANKYOU