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From the book:

ADR: American Depositary Receipt a specific number of shares in the home market that are held in the custody by a U.S. depositary bank. The depositary bank converts all dividends and other payments into U.S. dollars and charges a small custodial fee for its services. The Bank of New York dominates the ADR custodial market, with a market share of well over 50%, but JPMorgan Chase, Citibank, and Deutsche Bank are also important players. Whereas most of the U.S. companies use ADRs, a minority of companies, mostly Canadian ones, use ordinary listings, which means they are traded entirely like U.S. companies and face very similar SEC registration and adherence to the reporting requirements of U.S. generally accepted accounting principles (GAAP). GDR: Global Depositary Receipts are like ADRs, but they can trade across many markets and settle in the currency of each market. GDRs are not always associated with existing companies seeking to increase their shareholders base and raise additional capital. They can also be associated with companies wanting to tap the equity market for the first time. Some companies issue stock locally but also target foreign investors, especially foreign institutional investors. When a firm issues shares in multiple foreign markets, sometimes simultaneously with distribution in the domestic market, the issue is in the part of Euro-equity market. The euro-equity market involves in international issues originated and sold anywhere in the world.

From internet:
An Indian corporate can raise foreign currency resources abroad through the issue of American Depository Receipts (ADRs) or Global Depository Receipts (GDRs). Regulation 4 of Schedule I of FEMA Notification no. 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing Global Depository Receipts (GDRs) and/ or American Depository Receipts (ADRs), subject to the conditions that: The ADRs/GDRs are issued in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Central Government thereunder from time to time The Indian company issuing such shares has an approval from the Ministry of Finance, Government of India to issue such ADRs and/or GDRs or is eligible to issue ADRs/ GDRs in terms of the relevant scheme in force or notification issued by the Ministry of Finance, and There are no end-use restrictions on GDR/ADR issue proceeds, except for an express ban on investment in real estate and stock markets. The FCCB issue proceeds need to conform to external commercial borrowing end use requirements; in addition, 25 per cent of the FCCB proceeds can be used for general corporate restructuring

Regulations.

Is not otherwise ineligible to issue shares to persons resident outside India in terms of these

There is no limit upto which an Indian company can raise ADRs/GDRs. However, the Indian company has to be otherwise eligible to raise foreign equity under the extant FDI policy.

What is ADR and GDR


Indians are known world over for their regular savings habit. We have imbibed this very healthy habit from our forefathers who practiced it in their own way throughout their life, and lived a safe and satisfactory retired life due to this habit. In this generation too the same habit is widely prevalent. We invest in traditional savings like Bank Deposits, Mutual Funds, and many such avenues. The latest being, investments in stocks and shares. In the last two decades people investing and trading in stocks and shares of various companies that are listed in most of our stock exchanges that are spread across India, has become a regular means of earning extra income, or a means of creating savings in the near future. What if the companies whose shares are publicly traded in stock exchanges wishes to expand its fund raising capacities to opportunities to raise funds from people from other countries. This is where ADR and GDR come into picture.

What is ADR
ADR is the full form of American Depository Receipts. This is the recent method adopted by many large and well respected companies from India to raise funds from American Markets.

How ADR Operates


Indian companies have direct access to raise funds from Indian public by way of issuing Shares, Debentures etc. However Indian companies cannot do so, in such a direct manner, when it comes to raising funds from American people. That would entail the Indian companies to adopt US Accounting Norms which is also called as GAAP, maintain accounting practices as per American Financial Year (Which starts in January and ends in December of any particular year), as also follow variety of stringent standards as per American norms. Effectively, it would mean that the Indian company would have to follow two different set of rules simultaneously, one to comply with the laws of Indian Companies Act, and the other to comply with the American Laws. The method to circumvent the American norms, but still raise funds from American people is available by way of ADR or American Depository Receipts. In this system, the Indian company deposits certain amount of its Indian shares with designated American Banks. The banks, in turn, issues receipts that are equivalent in values (And also based on the intrinsic value the Indian Companys shares would fetch in the American market) to the Indian Company. These receipts essentially would be in number of receipts. Then these Indian Companies can trade these ADRs or American Depository Receipts with the American public. These ADRs can be purchased and traded freely without any encumbrances in the American Stocks and Shares Market. This way the Indian company is able to enter into the American Stocks and Shares market, and raise funds from the American public. The role of the American bank which has issued these receipts is very crucial, since it is they who stand guarantee to the issued receipts. Hence they do exhaustive study of the Indian company from all perspectives, and only then issue the ADR to the Indian company.

What is GDR and how it operates


The full form of GDR is Global Depository Receipt. It is not a different financial instrument, as it may sound, from that of ADR. In fact if the Indian Company which has issued GDRs in the American market wishes to further extend it to other developed and advanced countries such as Europe, then they can sell these ADRs to the public of Europe and the same would be named as GDR.

Indian Companies with ADR & GDR


There are quite a lot of successful Indian companies that have now issued ADRs and GDRs. Some such companies are given underneath.

Dr. Reddys HDFC Bank ICICI Bank Infosys Technologies MTNL VSNL WIPRO

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 investors 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). 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 companys 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.

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