This action might not be possible to undo. Are you sure you want to continue?
that are marketed outside of the company¶s home country to increase its visibility in the world market and to access a greater amount of investment capital in other countries. Depositary receipts are structured to resemble typical stocks on the exchanges that they trade so that foreigners can buy an interest in the company without worrying about differences in currency, accounting practices, or language barriers, or be concerned about the other risks in investing in foreign stock directly. American depositary receipts (ADRs) were the 1st depositary receipts issued²JP Morgan issued the 1st ADR in 1927. ADRs allowed companies domiciled outside of the United States to tap the United States capital markets. ADRs were structured to resemble other stocks on the American exchanges with comparable prices per share, shareholder notifications in English, and the use of United States currency for the sale and purchase of ADRs and for dividend payments. A GDR is similar to an ADR, but is a depositary receipt sold outside of the United States and outside of the home country of the issuing company. Most GDRs are, regardless of the geographic market, denominated in United States dollars, although some trade in Euros or British sterling. There are more than 900 GDR¶s listed on exchanges worldwide, with more than 2,100 issuers from 80 countries. Although ADRs were the most prevalent form of depositary receipts, the number of GDRs has recently surpassed ADRs because of the lower expense and time savings in issuing GDRs, especially on the London and Luxembourg stock exchanges.
GDR Advantages and Disadvantages
GDRs, like ADRs, allow investors to invest in foreign companies without worrying about foreign trading practices, different laws, or cross-border transactions. GDRs offer most of the same corporate rights, especially voting rights, to the holders of GDRs that investors of the underlying securities enjoy. Other benefits include easier trading, the payment of dividends in the GDR currency, which is usually the United States dollar (USD), and corporate notifications, such as shareholders¶ meetings and rights offerings, are in English. Another major benefit to GDRs is that institutional investors can buy them, even when they may be restricted by law or investment objective from buying shares of foreign companies. GDRs also overcome limits on restrictions on foreign ownership or the movement of capital that may be imposed by the country of the corporate issuer, avoids risky settlement procedures, and eliminates local or transfer taxes that would otherwise be due if the company¶s shares were bought or sold directly. There are also no foreign custody fees, which can range from 10 to 35 basis points per year for foreign stock bought directly. GDRs are liquid because the supply and demand can be regulated by creating or canceling GDR shares.
With the current correction in the Indian stock market. And the logic of investing in Indian equity market has become even more compelling. India is hot these days all major brokerages are of the opinion that India has a great long term potential. Similarly. the valuations have become even better. which is usually USD. Let¶s understand these better. This is great for people living in India ± they can invest in various mutual funds (MFs). and how they can be used by Non Resident Indians (NRIs) and non-Indians for making investments in India. have foreign exchange risk if the currency of the issuer is different from the currency of the GDR. What is American Depository Receipt (ADR) and Global Depository Receipt (GDR)? This article explains what ADRs and GDRs are. a larger and more diverse shareholder base. and that investors in India would reap handsome benefits in the next 10 years. . which usually garners increased research coverage in the new markets. and the ability to raise more capital in international markets. or can choose some great companies and invest in those. GDR stands for Global Depository Receipt. What is an ADR / GDR? ADR stands for American Depository Receipt. how can they benefit from the potential that India offers? There are some very good proxies to investing directly in India ± and ADRs and GDRs are a great option.GDRs do. however. The main benefit to GDR issuance to the company is increased visibility in the target markets. (Confused if you should invest in stocks directly or through mutual funds? Please read ³Direct investment in Stocks versus Mutual Funds (MFs)?´) But what about Non Resident Indians (NRIs) and foreign nationals? Considering the many restrictions on NRIs and foreign nationals investing in India.
But many good companies get listed on these stock exchanges indirectly ± using ADRs and GDRs. are called Depository Receipts.Every publicly traded company issues shares ± and these shares are listed and traded on various stock exchanges. These shares are sometimes also listed and traded on foreign stock exchanges like NYSE (New York Stock Exchange) or NASDAQ (National Association of Securities Dealers Automated Quotation). If the depository receipt is traded in the United States of America (USA). it is called a Global Depository Receipt. the company has to comply with the policies of those stock exchanges. each receipt having a fixed number of shares as an underlying (Usually 2 or 4). What is the difference between ADR and GDR? Both ADR and GDR are depository receipts. But to list on a foreign stock exchange. How can you use an ADR / GDR? . and represent a claim on the underlying shares. This deters these companies from listing on foreign stock exchanges directly. The issuing bank acts as a depository for these shares ± that is. Each receipt amounts to a claim on the predefined number of shares of that company. These receipts are listed on the stock exchanges. The bank issues receipts against these shares. The only difference is the location where they are traded. or an ADR. it stores the shares on behalf of the receipt holders. companies in India issue shares which are traded on Indian stock exchanges like BSE (The Stock Exchange. If the depository receipt is traded in a country other than USA. Many times. which are traded like ordinary stocks. it is called an American Depository Receipt. or a GDR. These receipts are then sold to the people of this foreign country (and anyone who is allowed to buy shares in that country). They behave exactly like regular stocks ± their prices fluctuate depending on their demand and supply. Mumbai). etc. the policies of these exchanges in US or Europe are much more stringent than the policies of the exchanges in India. Thus. and depending on the fundamentals of the underlying company. This is what happens: The company deposits a large number of its shares with a bank located in the country where it wants to list indirectly. These receipts. NSE (National Stock Exchange).
By buying these. Reddys HDFC Bank Hindalco ICICI Bank Infosys Technologies ITC L&T MTNL Patni Computers Ranbaxy Laboratories Tata Motors ADR No Yes Yes No Yes Yes No No Yes Yes No Yes GDR Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes No . Company Bajaj Auto Dr.ADRs and GDRs are not for investors in India ± they can invest directly in the shares of various Indian companies. Below is a partial list. NRIs and foreigners can buy these using their regular equity trading accounts! Which Indian companies have ADRs and / or GDRs? Some of the best Indian companies have issued ADRs and / or GDRs. they can invest directly in Indian companies without going through the hassle of understanding the rules and working of the Indian financial market ± since ADRs and GDRs are traded like any other stock. But the ADRs and GDRs are an excellent means of investment for NRIs and foreign nationals wanting to invest in India.
Investopedia explains Foreign Currency Convertible Bond . A convertible bond is a mix between a debt and equity instrument.State Bank of India VSNL WIPRO No Yes Yes Yes Yes Yes Foreign Currency Convertible Bond . the money being raised by the issuing company is in the form of a foreign currency. the coupon payments on the bond are lower for the company. In other words.FCCB these types of bonds are attractive to both investors and issuers. thereby reducing its debt-financing costs.FCCB Mean? A type of convertible bond issued in a currency different than the issuer's domestic currency. (Bondholders take advantage of this appreciation by means warrants attached to the bonds.FCCB What Does Foreign Currency Convertible Bond . which are activated when the price of the stock reaches a certain point. The investors receive the safety of guaranteed payments on the bond and are also able to take advantage of any large price appreciation in the company's stock. which adds value.) Due to the equity side of the bond. It acts like a bond by making regular coupon and principal payments. . but these bonds also give the bondholder the option to convert the bond into stock.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.