Global Depository Receipt By

Chandan Senapati Ranjan Kumar Sethi

Need for Depository Receipt?

Depository Receipt

A depository receipt is a transferable financial security which can be traded on stock exchange.

Examples of depository receipts are ADR and GDR.

Process to issue of DR

GDR

If those depository receipts are listed on non-us stock exchange, then they will be called GDR.

It is denominate in US dollars or Euros.

Currently, the stock exchanges trading GDRs:

London Stock Exchange

Luxembourg Stock Exchange

Singapore Stock Exchange

Hong Kong Stock Exchange

How does GDR work?

• Let,1 ITC share in Indian market trades around Rs. 1000. Means 10 Euros.

• HSBC buys 100 shares of ITC and issues in the ratio 10:1 in foreign market .

• Means 1 GDR represents 10 ITC share, i.e. 100 Euros.

• Subsequent price is determined by market forces.

Which Indian Companies have GDR

Bajaj Auto INFOSYS TECHNOLOGIES

Dr Reddy’s SBI

HDFC Bank WIPRO

ICICI bank VSNL

ITC

L&T

MTNL

HINDALCO

GDR listing requirement

• Admission to trading on a Recognized Stock Exchange.

• Transferability of the Underlying Shares & GDRs: The shares underlying the GDRs as well as GDRs itself must be freely transferable, fully paid and free from any restrictions on transfer.

• 25% of the GDRs must be in public hands. This 25% should not include any investor taking more than 5%.

• Market capitalization: The expected aggregate market value of all GDRs to be listed must be at least £700,000.

Advantages provided by GDR

TWO FOLDEDInvestor’s advantageIssuer’s advantage

Investor’s Advantage

Helps investors to invest in foreign companies Advantage of emerging market economies Improves communication with share holders

globally More transparency and stability

Issuer’s Advantage

Attracting foreign investors Exposure in international market Enhances company’s visibility, status and profile Rise in capital