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ADR & GDR

Depository receipts
Instruments issued by international depositories (ODB) Represent an interest in the underlying shares held in the issuer company. usually held by a domestic custodian on behalf of the depositories in turn issue the depository receipts, which entitle the holder of the receipts to get the underlying shares on demand.

DR listed and traded on Stock Exchanges in the US, Singapore,Luxembourg,London,etc. DR listed and traded in US markets are known as American Depository Receipts (ADRs) Those listed and traded else where are known as Global Depository Receipts (GDRs).

ADR is a dollar denominated negotiable certificate. It represents a non-US companys publicly traded equity. It was devised in the late 1920 s to help Americans invest in overseas securities and to assist non-US companies wishing to have their stock traded in the American Markets. ADR were introduced as a result of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values.

Process to issue adr/gdr

ADVANTAGES OF ADR/GDR
Can be listed on any of the overseas stock exchanges/OTC/Book entry transfer system. Freely transferable by non-resident. They can be redeemed by ODB. The ODB should request DCB to get the corresponding underlying shares released infavor of nonresident of investors.

A bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank. The shares trade as domestic shares, but are offered for sale globally through the various bank branches. A financial instrument used by private markets to raise capital denominated in either U.S. dollars or Euros. The voting rights of the shares are exercised by the Depository as per the understanding between the issuing company and the GDR holders.

Difference between ADR & GDR


Global depository receipt (GDR) is compulsory for foreign company to access in any other countrys share market for dealing in stock. But American depository receipt (ADR) is compulsory for non us companies to trade in stock market of usa . Indian companies prefer to get GDR due to its global use for getting foreign investment for own business projects.

GDR is negotiable instrument all over the world but ADR is only negotiable in USA . Investors of UK can buy GDRs from London stock exchange and luxemberg stock exchange and invest in Indian companies without any extra responsibilities . Investors of USA can buy ADRs from New york stock exchange (NYSE) or NASDAQ (National Association of Securities Dealers Automated Quotation).

American investors typically use regular equity trading accounts for buying ADRs but not for GDRs