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INTRODUCTION

Financial markets connect capital from investors to the most productive


applications in firms. Firms seek the lowest possible cost of capital for
financing projects.
There are two alternative mechanisms through which foreign investors can
connect with firms in India. The first mechanism involves direct
participation by foreign investors in the Indian financial markets. The
second mechanism involves participation by Indian firms in overseas
financial markets.
One important mechanism through which investment in Indian securities
takes place in overseas markets is through Depository Receipts(DR).
DEPOSITORY RECEIPTS (DR)
CLASSIFICATION OF DR
Sponsored

Unsponsored

DR
Listed

Unlisted
AMERICAN DEPOSITORY RECEIPT
(ADR)

ADR is a negotiable security that


represents securities of a non-us
company that trades in the us financial
markets
CLASSIFICATION OF ADR
LEVEL 1

LEVEL 2

ADR
LEVEL 3

RULE 144A
SPECIMEN COPY OF ADR
GLOBAL DEPOSITORY RECEIPT(GDR)
DIFFERENCE BETWEEN ADR & GDR
BASIS FOR ADR GDR
COMPARISON
Acronym American Depository Receipt Global Depository Receipt
ADR is a negotiable instrument GDR is a negotiable
Meaning issued by a US bank, instrument issued by the
representing non-US company international depository bank,
stock, trading in the US SE representing foreign companys
stock trading globally

Relevance Foreign companies can trade Foreign companies can trade in


in US stock market any countrys stock market
other than US stock market
Issued in United states domestic capital European capital market
market
Listed in American stock exchange such Non-US stock exchange such
as NYSE or NASDAQ as London SE or Luxembourg
SE
Negotiation In America only All over the world
Disclosure Requirement onerous Less onerous
Market Retail investor market Institutional market

NYSE Newyork Stock Exchange

NASDAQ National Association Of Securities Dealers Automated Quotations


PROCESS TO ISSUE ADR/GDR
RBI REGULATIONS PERTAINING TO
ISSUE OF ADR/GDRs
Indian companies can raise foreign currency resources abroad through the
issue of ADRs/GDRs, in accordance with the scheme for issue of Foreign
Currency Convertible Bonds & Ordinary Shares Scheme 1993 & guidelines
issued by the central government there under from time to time
The company can issue ADRs/GDRs if it is eligible to issue shares to
persons resident outside in India under the FDI scheme
An Indian listed company which is not eligible to raise funds from the
Indian capital market including a company which has been restrained
from accessing the SEBI will not be eligible to issue ADRs/GDRs
Unlisted companies which have not yet accessed the ADR/GDR route for
raising capital in the international market would require prior or
simultaneous listing in the domestic market , while seeking to issue such
overseas instruments
Unlisted companies which have already issued ADRs/GDRs in the
international market , have to list in the domestic market on making
profit or within three years of such issue of ADRS/GDRs. Whichever is
earlier

There are no end use restrictions for a ban on deployment / investment


of such funds in real estate or the stock market. There is no monetary
limit up to which an Indian company can raise ADRs/GDRs

Voting rights on shares issued under the scheme shall be as per the
provisions of companies Act 1956 & in a manner in which restrictions on
voting rights imposed on ADR/GDR issues shall be consistent with the
company law provisions

Erstwhile OCBs who are not eligible to invest in India through the
portfolio route & entities prohibited to buy , sell or deal in securities by
SEBI will not be eligible to subscribe to ADRs/GDRs issued by Indian
companies
The pricing of ADR/GDR issues should be made at a price not less than the
higher of the following two averages:
i. The average of the weekly high & low of the closing prices of the related
shares quoted on the stock exchange during the six months preceding the
relevant date
ii. The average of the weekly high & low of the closing prices of the related
shares quoted on a stock exchange during the two weeks preceding the relevant
date
A limited two - way fungibility schemes has been put in place by the
government of India for ADRs/GDRs

An Indian company can also sponsor an issue of ADR/GDR. Under this


mechanism, the company offers its resident shareholders a choice to submit
their shares back to the company so that on the basis of such shares, ADRs &
GDRs can be issued abroad

Companies furnish full details of issue in the form enclosed in Annex-8 to the
Reserve Bank within 30 days from the date of closing of the issue.
Also furnish a quarterly return in the form enclosed in Annex-9, to Reserve
Bank within 15 days of the close of the calendar quarter
INDIAN DEPOSITORY RECEIPT(IDR)
IDR is a financial instrument denominated in Indian
rupees in the form of DR created by a domestic
depository against the underlying equity of issuing
company to enable foreign companies to raise funds
from the Indian securities market

Standard Chartered Plc, a UK based multinational bank


has become the first global company to file for an
issue of IDRs in India
The companys issue for 24 crore IDRs opened on
May 25, 2010.
Each 10 IDR represent 1 share in standard chartered
Plc, & buyers can earn bonuses or dividends
PERFORMANCE OF INDIAN COMPANIES
IN ADR & GDR MARKET
LIST OF ADR ISSUED BY INDIAN
COMPANIES
DR NAME DR LEVEL TYPE ADR/DOMESTIC DATE OF
EXCHANGE SHARE RATIO ISSUE
DR. Reddy NYSE Level 3 Sponsored 1:1 4/12/2001
Grasim ind.ltd OTC Level 1 Sponsored 1:1 7/29/1999

HDFC Bank ltd. NYSE Level 3 Sponsored 1:3 7/20/2001


ICICI Bank Ltd. NYSE Level 3 Sponsored 1:2 3/31/2000
India hospitality OTC Level 1 Sponsored 1:10 3/8/2010
corp.
Infosys Tech Ltd. NASDAQ Level 2 Sponsored 1:1 3/16/1999
Jk Lakshmi OTC Level 1 Sponsored 1:1 10/25/1994
cement ltd.
Rediff.com india NASDAQ Level 2 Sponsored 1:0.5 6/19/2000
Ltd.
SIFY Ltd. NASDAQ Level 2 Sponsored 1:1 10/22/1999
Southern portal 144 A sponsored 1:5 10/1/1993
petrochemical ind.
Sterlite industries NYSE Level 3 Sponsored 1:1 6/22/2007
india ltd.
Tata communications NYSE Level 2 Sponsored 1:2 8/15/2000
ltd.
Tata motors ltd. NYSE Level 2 Sponsored 1:1 9/27/2004
WIPRO Ltd. NYSE Level 3 Sponsored 1:1 10/24/2000
WNS Holding Ltd. NYSE Level 3 Sponsored 1:1 7/26/2006
LIST OF GDR ISSUED BY INDIAN
COMPANIES
DR NAME DR LEVEL TYPE GDR/DOMESTIC DATE OF
EXCHANGE SHARE RATIO ISSUE

ABL Bio - Luxembourg REGS Sponsored 1:5 6/20/2008


technologies Ltd.
Aditya Birla Nuvo Portal 144 A Sponsored 1:1 1/31/1994
Aftek Infosys Ltd. Luxembourg REGS Sponsored 1:3 2/10/2003
Amtek Auto Ltd. London REGS Sponsored 1:2 11/23/2004
Apollo Hospitals Portal 144 A Sponsored 1:1 7/7/2005
Enterprise Ltd.
Bajaj Auto Ltd. London REGS Sponsored 1:1 8/21/2008
Bag Films & Luxembourg REGS Sponsored 1:10 2/16/2010
media Ltd.
ADR/GDR FLOWS TO INDIA AFTER
1990s
(US $ Million)

YEAR GDR/ADR (Net)


1990-1991 -
1991-1992 -
1992-1993 240
1993-1994 1520
1994-1995 2082
1995-1996 683
1996-1997 1366
1997-1998 645
1998-1999 270
1999-2000 768
2000-2001 831
2001-2002 477
2002-2003 600
2003-2004 459
2004-2005 613
2005-2006 2552
2006-2007 3776
2007-2008 8769
2008-2009 1162
2009-2010 3328
2010-2011 2049
2011-2012 597
2012-2013 187
2013-2014 20
2014-2015 0
Source: Handbook of Statistics on Indian Economy
Due to Chinas currency devaluation , in 2015; global traiding in DRs

decreased only 0.10% in volume & 8.6% in value terms. ( As per JP


Morgans DR:Year in Review 2015)

ADR/ GDR FLOWS TO INDIA : 2015-2016

US $ billion
ADR/GDR

2015 - 2016 0.4


(April Sept )

Source : RBI Publications


DR PRICES & VOLUME
DR 16/5/16 17/5/16 18/5/16 19/5/16 20/5/16 1 YR.
NAME AVG(AS OF
20/5/16)
ICICI PRICE 6.83 6.78 6.87 6.62 6.65
10.2 M
VOLUME 6629876 8337530 12072230 13559667 5352800
INFY PRICE 18.86 18.42 18.64 18.47 18.46
4.2 M
VOLUME 2250632 2203223 2166081 1799920 1399600
TATA PRICE 29.30 28.23 28.59 28.44 28.74
MOTORS 1.8 M
VOLUME 977442 2059055 1449483 1068252 935400
HDFC PRICE 64.49 63.39 63.77 62.18 63.16
747.3 K
VOLUME 439189 700581 1124060 1182455 389600
WIPRO PRICE 11.98 11.84 11.94 11.87 12.00
540.4 K
VOLUME 269866 310404 759885 221151 260200
DR. PRICE 45 44.92 45.19 44.67 44.78
REDDY 385.5 K
VOLUME 534121 358668 377306 268677 183300
WNS PRICE 30.07 28.80 28.93 28.81 29.34
HOLDING 177.0 K
VOLUME 377811 305441 434115 149367 128100
SIFY PRICE 1.10 1.11 1.11 1.11 1.18
42.4 K
VOLUME 50200 64000 6500 6400 31200
SBI PRICE 26.60 26.55 27.10 26.10 25.85
3.6 K
VOLUME

SOURCE: sharekhan.com/stock market/equity/company-statistics/ADR-GDR.htm


: https://www.adr.com
CONCLUSION
Firms in emerging nations seek to take advantage of the depth of the
markets in developed countries and enter the foreign capital markets for

raising new capital. Now our companies can easily raise capital from
foreign markets through ADRs/GDRs.

Investors around the world are increasingly looking across their national
borders in an effort to geographically diversify their portfolios by
investing in international securities. DR programmes are beneficial to the
investors who wants to diversify their portfolios internationally.