Scribd Logo
Upload

Welcome to Scribd!

  • 2K views

    Adr & GDR

    Uploaded by

    manishg_17
    American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs) allow investors to hold shares in foreign companies. ADRs are traded on American stock exchanges and allow US investors to purchase shares of non-US companies. GDRs allow companies from any country to raise capital from international investors. Both ADRs and GDRs provide benefits like diversification and access to high growth markets for both investors and companies seeking international investment. They involve the issuance of receipts by a US or international bank that represent an underlying number of shares in a foreign company traded on its home exchange.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd

    Adr & GDR

    Uploaded by

    manishg_17
    2K views19 pages
    American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs) allow investors to hold shares in foreign companies. ADRs are traded on American stock exchanges and allow US investors to purchase shares of non-US companies. GDRs allow companies from any country to raise capital from international investors. Both ADRs and GDRs provide benefits like diversification and access to high growth markets for both investors and companies seeking international investment. They involve the issuance of receipts by a US or international bank that represent an underlying number of shares in a foreign company traded on its home exchange.

    Original Title

    ADR & GDR

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs) allow investors to hold shares in foreign companies. ADRs are traded on American stock exchanges and allow US investors to purchase shares of non-US companies. GDRs allow companies from any country to raise capital from international investors. Both ADRs and GDRs provide benefits like diversification and access to high growth markets for both investors and companies seeking international investment. They involve the issuance of receipts by a US or international bank that represent an underlying number of shares in a foreign company traded on its home exchange.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    2K views19 pages

    Adr & GDR

    Uploaded by

    manishg_17
    American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs) allow investors to hold shares in foreign companies. ADRs are traded on American stock exchanges and allow US investors to purchase shares of non-US companies. GDRs allow companies from any country to raise capital from international investors. Both ADRs and GDRs provide benefits like diversification and access to high growth markets for both investors and companies seeking international investment. They involve the issuance of receipts by a US or international bank that represent an underlying number of shares in a foreign company traded on its home exchange.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 19

    ADR & GDR

    Presented By
    manish gupta
    2nd yr. student PGPBM Finance
    (2009-2011)
    Kohinoor business school,
    khandala, pune
    Depository Receipts (DR)

     Is a type of negotiable instrument (transferable)


    financial security.

     allows investors to hold shares in equity of other


    countries.
    What is ADR ?

    U.S
    • Domestic certificate
    Stock
    Exchange ADR
    ADR- American Depositary Receipts
    • ADR is a negotiable US certificate ownership of shares in an non-US
    corporation. It is quoted and traded in US dollars in US securities
    market and dividends are paid to investors in US dollars.
    • ADR is specifically designed to facilitate purchase, holding and sale of
    non-US securities by US investor and to provide corporate finance
    vehicle for non-US companies.
    ADR RECEIPT
    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

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

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

    • Fraction
    1 ADR = ½ SHARE
    ADR Ratio = 2:1
    How does ADR/GDR work ?

    • Suppose price of Infosys share in stock market is


    around Rs. 2000.
    • Lets $1= Rs 40, assume for simplicity.
    • Then US bank purchase 10000 shares of Infosys ,
    and issued ADR at ratio of 10:1.
    • It means 1 ADR= 10 shares, 1 ADR= Rs 400.
    ADR

    TYPES of ADR : ADR listing :


    • Unsponsored ADR NASDAQ
    • Sponsored ADR AMEX
     Level 1 NYSE
     Level 2
     Level 3
    Benefits of ADR

    • TO COMPANIES:

     Broadening and diversifying a company US’s


    investor base.

     Enhancing company visibility, status and profile in the


    US and internationally among investors.

     Offers a new source of raising equity capital, often at


    highly competitive rates.
    Benefits of ADR contd…….

    • TO INVESTORS:

     Convenient to purchase and hold a non-US issuer


    securities.

     Opportunities to invest and earn in US Dollars.

     Diversifying portfolio.

     Invest in high growth economies.


    Disadvantages of ADR

    • ADR cannot be exchanged with its home


    market security.
    Participants in ADR Market

    Brokers Depository

    Accountants Issuer Custodian

    Investment
    Banker Lawyers Investment
    Relations Firm
    GDR – Global Depositary
    Receipts

    • 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 GDRs to sell their stock on markets in
    countries other than the one where they have their
    headquarters.
    Objective of GDR

    • Enable investors in diversifying their funds in


    international securities.

    Factors effecting GDRs prices:


    • company track record
    • analysts recommendations
    • market conditions
    • international status of the company
    GDR Listing

    • London Stock Exchange


    • Luxembourg Stock Exchange
    • DIFX
    • Singapore Exchange
    • Hong Kong Exchange
    Advantages of GDRs

    • Shareholder wealth maximization.


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

    Disadvantage of GDRs:
    • GDR have foreign exchange risk i.e. currency of issuer is
    different from currency of GDR.
    India- ADR and GDR

    • ADRs and 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.

    • NRIs and foreigners can buy these using their regular


    equity trading accounts.
    Indian Companies using ADR/GDR

    • Some of them are:


    • Bajaj Auto
    • Dr. Reddy’s
    • HDFC Bank.
    • Hindalco.
    • ICICI Bank
    • Infosys
    • ITC
    • L&T
    • Wipro
    References

    • www.google.com
    • www.wikipedia.com
    • www.investopedia.com
    • www.businessfinance.com
    • www.icai.org

    You might also like