ADR and GDR

Depository receipt is a “ certificate which may be registered in the holders name but is more usually in form of a bearer security, giving the holder ownership of a specified number of shares in a company which have been deposited with a financial institution usually a depository bank.” It helps and permits the investors to acquire and trade in foreign securities and it gives access to major international markets. Depository receipt include American Depository Receipt( ADR) and Global Depository Receipts( GDR).

ADR and GDR are issued by overseas depositors against ordinary shares issued and placed with domestic custodian by Indian companies. Indian companies are permitted to access international capital markets through issue of ADR and GDR.

American Depository Receipts

It refers to securities offered, sold and traded in the American markets. Shares of foreign companies are traded in U.S stock markets in form of ADR. An ADR is issued by U.S bank and represents shares of foreign company held in custody in United States. By trading in ADRs, American investors manage to avoid problems of dealing in foreign securities markets. It enables companies to raise funds in the U.S financial markets.

Global Depository Receipts 

It refers to securities offered, sold and traded outside U.S and outside the company’s home country. They are certificates issued by bank in more than one country . The certificates allow the underlying shares which are traded in only one country to be offered globally without the need to be registered in foreign equity markets. The issuer doesn’t have to comply with U.S General Accepted Accounting Practices (GAAP) and Securities and Exchange Commission (SEC) disclosure requirements.

Post a Comment