ADR &

GDR
SUBMITTED BY:HIMANI KALRA
MBA (GEN)
SECTION A
35
USM, K.U.K

SUBMITTED
TO:DR ANIL MITTAL
PROFESSOR

TA B L E O F C O N T E N T S : 




What is ADR & GDR ?
HOW ADR & GDR WORK ?
ADR RATIO
SPECIMEN COPY OF ADR
ADVANTAGES OF ADR & GDR
INDIAN COMPANIES USING ADR &
GDR

WHAT IS ADR ?
ADR- AMERICAN DEPOSITARY RECEIPTS

A negotiable certificate issued by a US
bank

Represents a specified number of
shares of a foreign company

ADRs are denominated in US dollars.

HOW DOES ADR/GDR WORK’S

Let us take Infosys example- trades on the Indian stock at
around rs.2000/-

This is equivalent to US$ 40 – assume for simplicity

Now a US bank purchases 10000 shares of Infosys and
issues them in US in the ratio of 10:1

This means each ADR purchased is worth 10 Infosys
shares.

Quick calculation means 1 ADR =US $400

Once ADR are priced and sold, its subsequent price is
determined by supply and factor, like any ordinary shares.

ADR RATIO

Single
1 ADR = 1SHARE
ADR Ratio = 1:1

Multiple
1 ADR = 5 SHARES
ADR Ratio = 1:5

Fraction
1 ADR = ½ SHARE
ADR Ratio = 2:1

SPECIMEN COPY FOR ADR

ADR

Types of ADR:
ADR listing:
Unsponsored ADR
NASDAQ
Sponsored ADR
AMEX
Level1
NYSE

ADVANTAGES OF ADR:

It is an easy and cost effective way to buy shares
of a foreign company.

Reduces administrative cost and avoids foreign
taxes on every transaction.

Helps companies which are listed to tap the
American equity markets.

Any foreigners can purchase these securities.

The purchaser has a theoretical right to exchange
shares (non-voting right shares for voting rights).

GDR- GLOBAL DEPOSITRIORY RECEIPTS

A bank certificate issued in more than one
country for shares in a foreign company.

Offered for sale globally through the various
bank braches.

Shares trade as domestic shares.

GDR- CUSTODIAN BANK/ DEPOSITORY BANK

Custodian bank located in same country.

Works with the depository bank and follows
instructions from the depository bank.

Collects , remits dividends and forward
notices received from the depository bank.

GDR MARKET

GDRs can be created or cancelled depending on
demand and supply.

When shares are created , more corporate
stocks is placed in the custodian bank in the
depository bank account. The depository bank
then issues the new GDRs.

Factors governing the GDRs prices are company
track record , analysts recommendations,
relative valuations, market conditions and also
international status of the company.

GDR LISTING

LONDON STOCK EXCHANGE

LUXEMBOURG STOCK EXCHANGE

SINGAPORE EXCHANGE

HONGKONG EXCHANGE

GDR- ADVANTAGES &
DISADVANTAGES

GDRs allow investors to invest in foreign companies without
worrying about foreign trading practices, laws.

Easier trading , payments of dividends are in the GDR currency.

GDRs are liquid because they are based on demand and supply
which is regulated by creating or cancelling shares.

GDR issuance provides the company with visibility, more larger
and diverse shareholder base and the ability to raise more
capital in international markets.

However , they have foreign exchange risk i.e. currency of
issuer is different from currency of GDR.

INDIA- ADR & GDR

ADRs & GDRs are an excellent means
of investment for NRIs and foreign
nationals wanting to invest in INDIA.

By buying these, 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.

INDIAN COMPANIES USING ADR / GDR
COMPANY
Bajaj auto
Dr. reddys
HDFC Bank
Hindalco
ICICI Bank
Infosys technologies
ITC
L& T
MTNL

ADR
NO
YES
YES
NO
YES
YES
NO
NO
YES

GDR
YES
YES
YES
YES
YES
YES
YES
YES
YES
ETC…