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

U.S. AMERICA

CERTIFICATE

Thus, ADR is a negotiable U.S. certificate representing

ownership of shares in an non-US 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. holding and sale of non-US securities by US investor, and to provide a corporate finance vehicle for non-US companies.

ADRs were specifically designed to facilitate the purchase,

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.

 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.

DOMESTIC CUSTODIAN BANK Has a custody of Indian company equity shares

Releases Equity Shares

INDIAN COMPANY

Requests the bank to release of equity Shares

Gives Instructions to Issue ADRs/ GDRs

OVERSEAS DEPOSITORY BANK

Requests for buying ADR/GDR

Issue ADRs/GDRs

INVESTORS

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)

 Dr. Reddys
HDFC Bank

L&T
MTNL

Hindalco
ICICI Bank

Ranbaxy Laboratories
State Bank of India

Infosys Technologies
ITC

VSNL
WIPRO

COMPANIES

INVESTOR

Broadening and diversifying a companys investor base. Enhancing a company's visibility, status and profile in the other countries among investors Offers a new avenue for raising equity capital , often at highly competitive rates.

Convenient to purchase and hold other countries securities. Opportunity to earn & invest in other currencies

Diversifying portfolio
Invest in high growth economies.

Basis of comparison
Centre

ADR

GDR

The NYSE which is the largest stock exchange In the world is where the ADR is traded.

The LSE Is not as large as the NYSE overall, but Is the global centre for International equities, which dominate In Turnover. LSE satisfied with a statement of the difference between the UK and Indian Accounting standards

GAAP

Foreign companies listing in the US must reconcile their accounts to US GAAP.

Basis of comparison
Retail

ADR

GDR

A public offering in the US allows an issuer to access the US retail market. This provides extra source of demand.

GDR is Issued only to QIBs but ordinary investors cannot participate.

Liability

Legal liability of both a company and its individual directors increased by a full US listing.

Legal liability of a company and its directors is less than in the case of an ADR.

Basis of comparison
Cost

ADR

GDR

US listing could be expensive. Total initial costs likely to be in the range of US $10,00,000 to US $20,00000

GDR listing on the LSE is comparatively Inexpensive. Initial costs likely to be in the range US $2,00,000 to US $4,00,000.