AMERICAN DEPOSITARY RECEIPTS

What is ADR?

An ADR is a negotiable U.S. certificate representing ownership of shares in an non-U.S. corporation. ADRs are quoted and traded in U.S. dollars in the U.S. securities market. Also, the dividends are paid to investor in U.S. dollars. ADRs were specifically designed to facilitate the purchase, holding and sale of non-U.S. securities by U.S. investor, and to provide a corporate finance vehicle for non-U.S. companies.

Some more points about ADRs...

ADRs were first introduced in 1927. The stock of many non-US companies, trade on US exchanges through the use of ADRs. ADRs enable US investors to buy shares in foreign companies without undertaking cross-border transactions. The shares of the non-US corporation trade on a non-US exchange, while the ADRs trade on a US exchange.

ADR Ratio

ADR Issue

Benefits of ADRs
BENEFITS COMPANIES TO BENEFITS INVESTORS TO

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

Convenient to purchase and hold a non-U.S. issuer's securities. Opportunity to invest and earn in US dollars. Diversifying portfolio. Invest in high-growth economies.

Working of ADR Market

Participants in ADR Market
ISSUER
Appoint depositary, lawyers, investment bank, etc. Determine program type. Obtain approval from Board of Directors, shareholders and regulators.

DEPOSITARY

BROKERS

Prepare & issue certificates. Announcement of issue. Coordinate with lawyers, accountants & bankers.

Make securities available to investors. Submit required forms. Execute & settle trades.

CUSTODIAN

INVESTMENT BANKERS

Receive underlying shares. Confirm deposit of underlying shares. Transmit dividend payments. Advise on DR structure. Conduct roadshow. Price & launch securities.

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