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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
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.
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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.