Adr / Gdr in India
GLOBAL DEPOSITORY RECEIPTS
IN INDIA Chapter - 1
INTRODUCTION OF FINANCIAL MARKETS
INTRODUCTION
The Indian economy is the second fastest growing economy in the world after China with a growth rate of 6.5%. India seems to have become an investor’s haven with high returns on investments for foreign Institutional investors. Indian companies are recording higher profits and are gaining global recognition because of operations in several countries. However, for international presence, Indian companies need funds from time to time to expand their business. Companies either raise funds from the domestic market or through international market. For international funding, the most popular source amongst the Indian companies in the recent times has been American Depository Receipts (ADR) and Global Depository Receipts (GDR). The Finance Ministry has projected inflows of $4.5 billion through the ADR/GDR/FCCB (Foreign Currency Convertible Bond) route during the current fiscal year. This chapter deals with the concept of ADR/GDR, the process involved in such issues and the recent changes made by the government in the regulations for ADR/GDR.
ADR/GDR – The concept
ADR/GDR are negotiable certificates that enable domestic investors of a country to own shares in foreign companies. ADR/GDR are issued by non resident companies to residents of another country through depositories situated in the country from which a company intends to raise funds through depository receipts. Each unit of ADR/GDR represents a given number of a company’s shares and can be traded freely as any other security in the capital market. The role of depositories in an issue of ADR/GDR is very crucial, as depositories act as custodians of the shares, against which the ADR/GDR are issued. As the names suggest, ADR are issued in American capital markets while GDR are issued in all other countries.
Procedure
The procedure for issue of ADR/GDR is different from issuing shares in the domestic capital market. The
IN INDIA Chapter - 1
INTRODUCTION OF FINANCIAL MARKETS
INTRODUCTION
The Indian economy is the second fastest growing economy in the world after China with a growth rate of 6.5%. India seems to have become an investor’s haven with high returns on investments for foreign Institutional investors. Indian companies are recording higher profits and are gaining global recognition because of operations in several countries. However, for international presence, Indian companies need funds from time to time to expand their business. Companies either raise funds from the domestic market or through international market. For international funding, the most popular source amongst the Indian companies in the recent times has been American Depository Receipts (ADR) and Global Depository Receipts (GDR). The Finance Ministry has projected inflows of $4.5 billion through the ADR/GDR/FCCB (Foreign Currency Convertible Bond) route during the current fiscal year. This chapter deals with the concept of ADR/GDR, the process involved in such issues and the recent changes made by the government in the regulations for ADR/GDR.
ADR/GDR – The concept
ADR/GDR are negotiable certificates that enable domestic investors of a country to own shares in foreign companies. ADR/GDR are issued by non resident companies to residents of another country through depositories situated in the country from which a company intends to raise funds through depository receipts. Each unit of ADR/GDR represents a given number of a company’s shares and can be traded freely as any other security in the capital market. The role of depositories in an issue of ADR/GDR is very crucial, as depositories act as custodians of the shares, against which the ADR/GDR are issued. As the names suggest, ADR are issued in American capital markets while GDR are issued in all other countries.
Procedure
The procedure for issue of ADR/GDR is different from issuing shares in the domestic capital market. The