Depository receipts are instruments issued by international depositories (ODB),
and they represent an interest in the underlying shares held by them in the
issuer company (Indian Company). The shares are 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
DRs are traded on Stock Exchanges in the US, Singapore, Luxembourg, London,
DRs listed and traded in US markets are known as American Depository Receipts
(ADRs) and those listed and traded elsewhere are known as Global Depository
Receipts (GDRs). In Indian context, DRs are treated as FDI.
ININTTEERRNNAATTIOIONNAALL C CAAPPITITAALL M MAARRKKEETT
ININTTEERRNNAATTIOIONNAALL B BOONNDD M MAARRKKEETT ININTTEERRNNAATTIOIONNAALL E EQQUUITITYY M MAARRKKEETT
BOND GGDDRR AADDRR
AMERICAN DEPOSITORY RECEIPTS
ADR is a dollar-denominated negotiable certificate. It represents a non-US
company’s publicly traded equity. It was devised in the late 1920s 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
(Bank Of America)
Issue of DR
Advantages Of ADR/GDR
Can be listed on any of the overseas stock exchanges /OTC/Book entry
Freely transferable by non-resident.
They can be redeemed by ODB.
The ODB should request DCB to get the corresponding underlying shares
released in favor of non resident of investors. (Shareholders of issuing
Types of ADR
SPONSORED ADR UNSPONSORED ADR
Issued with cooperation of the
company whose stock will underlie the
Issued by – broker/dealer or depository
bank without the involvement of
company whose stock underlies the
Comply with regulatory reporting. No regulatory reporting
Listing on international
Stock Exchanges allowed.
Trade on OTC market
Level 1 ADRs:
Level 1 ADRs are the lowest level of sponsored ADRs and also the simplest
method for companies to access the US capital markets.
Level 1 ADRs are traded in the over-the –counter (OTC) market.
The issuing company does not have to comply with US generally accepted
accounting principles (GAAP) or provide US Securities and Exchange
Commission (SEC) disclosure.
Level 1 ADRs essentially enable a company to obtain the benefits of a US
publicly traded security without altering their current reporting process.
Companies that have level 1 ADRs may upgrade to level II or level III ADR
They require minimal SEC registration.
Level II ADRs:
Level II ADRs enable companies to list their ADRs on Nasdaq, the American
Stock Exchange, the New York Stock Exchange and the OTC bulletin board,
thereby offering higher visibility in the US market, more active trading and
Level II ADRs require full registration with the Securities and Exchange
Commission. Companies must also meet the requirements of the
appropriate stock exchange.
Level II ADRs require a form 20-F and form F-6 to be filled with the SEC, as well
as meeting the listing requirements and filing a listing application with the
designated stock exchange. Upon F-6 effectiveness and approval of the
listing application, the ADRs begin trading.
Level III ADRs:
level III ADRs enable companies to list their ADRs on Nasdaq, the Amex, the
NYSE or the OTC Bulletin Board and make a simultaneous public offering of
ADRs in the united states
The benefits of level III ADRs are substantial; it allows the issuer to raise capital
and leads to much greater visibility in the U.S market.
Level III ADR programs must comply with various SEC rules, including the full
registration and reporting requirements of the SEC's Exchange Act.
Pricing of ADR/GDR
Should not be less than higher of the two following
Avg weekly (high & low) closing prices in the last six months.
Avg weekly (high & low) closing prices in the last two weeks.
Issue related expenses: should not exceed
4%--- in case of GDR
7%----in case of ADR
2%----Private placement of ADR’s/GDR’s.
There are no end-use restrictions on GDR/ADR issue proceeds, except for an
express ban on investment in real estate and stock markets.
India's STERLITE INDUSTRIES LTD
Raised $1.75 billion
ADSs that were offered: 130,440,000 ADSs
Offering price: $13.44 per ADS
Underwriters: Merrill Lynch, Fenner & Smith Inc, Morgan Stanley & co. intl plc, and
Citigroup, Global markets Inc
Depositary for the ADS: Citibank, N.A.
Total expenses of the offering excluding
Underwriting discounts & commissions: $ 9.0 million
Registration fees: $ 0.1 million
Printing fees: $1.6 million
Estimated legal fees: $ 2.5 million
Accounting fees: $2.0 million
Note: - Underwriters pay for their own legal fees
GLOBAL DEPOSITORY RECEIPTS
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.
Types of GDR
Rule 144A GDRs
Rule 144A GDRs are privately placed depositary receipts which are issued and
traded in accordance with Rule 144A. This rule was introduced by the SEC in April
1990 in part to stimulate capital raising in the US by non-US issuers.
Non-US companies now have ready access to the US equity private placement
market and may thus raise capital through the issue of Rule 144A GDRs without
complying with the stringent SEC registration and reporting requirements.
With the global integration of the major securities markets, it is now commonplace
to have fungible securities listed and cleared in more than one market.
Just as ADRs allow non-US issuers to access the important US market, GDRs allow
issuers to tap the European markets.
Difference Between ADR & GDR
American depository receipt (ADR) is
compulsory for non –us companies to trade
in stock market of USA.
Global depository receipt (GDR) is
compulsory for foreign company to access
in any other country’s share market for
dealing in stock.
ADRs can get from level 1 to level III. GDRs are already equal to high preference
receipt of level II and level III.
ADRs up to level –I need to accept only
general condition of SEC of USA.
GDRs can only be issued under rule 144 A
after accepting strict rules of SEC of USA .
ADR is only negotiable in USA . GDR is negotiable instrument all over the
Investors of USA can buy ADRs from New
york stock exchange (NYSE) or NASDAQ
Investors of UK can buy GDRs from London stock
exchange and luxemberg stock exchange and
invest in Indian companies without any extra
Which INDIAN companies have
ADR & GDR
COMPANY ADR GDR
Bajaj Auto No YES
Dr Reddy’s YES YES
HDFC Bank YES YES
ICICI bank YES YES
ITC NO YES
L&T NO YES
MTNL YES YES
HINDALCO NO YES
INFOSYS TECHNOLOGIES YES YES
TATA MOTORS YES NO
PATNI COMPUTERS YES NO
SBI NO YES
WIPRO YES YES
VSNL YES YES
INDIAN DEPOSITORY RECEIPTS
These are financial instrument that allows foreign companies to mobilize funds from
Indian capital market.
IDRs are the depository receipts dominated by Indian issued ₹ by the domestic
Represents interest in the share of non-Indian company’s equity.
Like equity shares, these are unsecured instruments & negotiable from one to
It provides chance to Indian investors to hold equity shares of foreign company’s.
Who can Invest?
Any person who is resident in India as defined under FEMA.
SEBI registered foreign institutional investor including their sub accounts.
Intermediaries involved in issuance
Registrar and transfer agent
As per the companies IDR rules
Capital Pre issue paid up capital and free reserve are at least US$ 50
Market capitalization Minimum average market capitalization (during the last 3 years) in
its parent country of at least US$ 100 million.
Operation history Continuous trading record or history on a stock exchange in its
parent country at least 3 immediately preceding years.
Track record of
Track record of distributable profits in terms of section 205 of the
companies act. 1956 for at least 3 out of immediately preceding 5
Other requirements Fulfil such other eligibility criteria as may be laid down by SEBI from
time to time in this behalf.
Allocation of the Issues
Minimum 50% of the issue should be allotted qualified institutional buyers (QIB).
30% of the issue should be offered to retail individual investors (RIB) including
Balance 20% to be appointed between Non-institutional investors (NII).
Issue Size- Issue shall not be less then ₹50crore.
Minimum application amount- Shall be ₹20,000.
Extent of issue- The no. of underlying issue shares offered in a financial year through IDR
offering shall not exceeds 25% of the post issue no. of equity share of the company.
Limits of Investment
RII- Minimum of 20,000 of and ₹ maximum of ₹1,00,000.
NII- Above ₹1,00,000 and up to the issue size
QIB-Above ₹1,00,000 and up to the issue size.
Eligibility criteria & public offering
Listing on stock Exchange
Benefits to the Key Stack Holders