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    Depository Receipts

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    kurdiausha29
    Depository receipts allow foreign companies to have their shares traded on a local stock exchange. There are three main types: American Depositary Receipts (ADRs) which trade on US exchanges, Global Depositary Receipts (GDRs) which trade internationally outside the US, and Indian Depositary Receipts (IDRs) which trade on Indian exchanges. A depository receipt is issued by a bank and represents shares of a foreign company held in that company's home market. This allows local investors to invest in foreign companies without having to trade on the foreign exchange.

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    Depository Receipts

    Uploaded by

    kurdiausha29
    25 views2 pages
    Depository receipts allow foreign companies to have their shares traded on a local stock exchange. There are three main types: American Depositary Receipts (ADRs) which trade on US exchanges, Global Depositary Receipts (GDRs) which trade internationally outside the US, and Indian Depositary Receipts (IDRs) which trade on Indian exchanges. A depository receipt is issued by a bank and represents shares of a foreign company held in that company's home market. This allows local investors to invest in foreign companies without having to trade on the foreign exchange.

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    Depository receipts allow foreign companies to have their shares traded on a local stock exchange. There are three main types: American Depositary Receipts (ADRs) which trade on US exchanges, Global Depositary Receipts (GDRs) which trade internationally outside the US, and Indian Depositary Receipts (IDRs) which trade on Indian exchanges. A depository receipt is issued by a bank and represents shares of a foreign company held in that company's home market. This allows local investors to invest in foreign companies without having to trade on the foreign exchange.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    25 views2 pages

    Depository Receipts

    Uploaded by

    kurdiausha29
    Depository receipts allow foreign companies to have their shares traded on a local stock exchange. There are three main types: American Depositary Receipts (ADRs) which trade on US exchanges, Global Depositary Receipts (GDRs) which trade internationally outside the US, and Indian Depositary Receipts (IDRs) which trade on Indian exchanges. A depository receipt is issued by a bank and represents shares of a foreign company held in that company's home market. This allows local investors to invest in foreign companies without having to trade on the foreign exchange.

    Copyright:

    © All Rights Reserved
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    What is Depository Receipt?

    • Depository receipts are negotiable instruments, issued by a bank representing the share of a
    foreign company traded on a local stock exchange.

    • It is a type of physical certificate through which investors can hold shares in the equity of other
    countries.

    American Depositary Receipts (ADRs) American Depositary Receipts (ADRs) are financial
    instruments that allow investors in the United States to invest in foreign companies shares.
    ADRs represent shares of a foreign company held by a U.S. depositary bank. These banks
    purchase the foreign company's shares, hold them, and issue ADRs in the U.S. market (i.e.
    NYSE, AMEX, NASDAQ)

    Example: Let's consider a German company, XYZ GmbH, that wants to access U.S. investors. It
    can choose to create ADRs. A U.S. depositary bank, such as Bank ABC, purchases shares of
    XYZ GmbH from the German market.
    Examples
    ● Infosys ADR
    ● ICICI Bank ADR
    ● Wipro ADR
    ● HDFC Bank ADR
    ● MakeMyTrip.
    ● Dr. Reddy's Labs ADR
    ● Warner & Spencer

    Bank ABC then issues ADRs representing these shares, which are listed and traded on U.S.
    exchanges like the New York Stock Exchange. U.S. investors can now buy and sell ADRs of
    XYZ GmbH, allowing them to indirectly invest in the German company.

    Global Depositary Receipts (GDRs)

    Global Depositary Receipts (GDRs) are similar to ADRs but are issued and traded outside the
    United States. GDRs enable investors worldwide to invest in foreign companies without directly
    accessing the local stock exchanges where the companies are listed.

    Example: Suppose a Chinese company, ABC Co., wants to attract international investors. It can
    opt issue GDRs. An international depositary bank, such as Bank XYZ, purchases shares of ABC
    Co. from the Chinese market.
    Bank XYZ then issues GDRs representing these shares, which are typically listed and traded on
    exchanges like the London Stock Exchange or Luxembourg Stock Exchange. Investors outside
    of China can now buy and sell GDRs of ABC Co., providing them with exposure to the
    company's performance.
    Example-
    ● Aditya Birla Capital
    ● Ambuja Cements
    ● Apollo Hospitals
    ● Axis Bank
    ● Bharat Hotels
    ● Bombay Dyeing & Manufacturing

    Indian Depository Receipts (IDRs) Indian Depository Receipts (IDRs) are financial instruments
    that facilitate foreign companies to raise capital from Indian investors. IDRs are listed and traded
    on Indian stock exchanges and represent shares of the foreign company.

    Example: Suppose a multinational company, ABC Inc., wants to tap into the Indian market. It
    can choose to issue IDRS. An Indian depositary bank, such as Bank LMN, purchases shares of
    ABC Inc. from the company's home market.

    Bank LMN then issues IDRS representing these shares, which are listed and traded on Indian
    exchanges like the National Stock Exchange. Indian investors can now invest in the
    performance of ABC Inc. by buying and selling IDRs on the Indian stock market.

    Process of Issuing Depository Receipt

    ISSUE OF EQUITY SHARES:


    Domestic Company issues equity shares to a Domestic Custodian, which are denominated in
    the national currency of the country.

    UPDATING THE DEPOSITORY BANK:


    Domestic Custodian keeps the equity shares denominated in local currency on deposit, in the
    company's home country and updates/informs the Depository Bank to issue Depository
    Receipts on behalf of the issuing company.

    3 ISSUE OF DEPOSITORY RECEIPTS TO INVESTORS: After the receipt of the instruction


    from the Custodian Bank, the Depository Bank issues the DR to the foreign investors. Besically.
    The depository bank is a large international bank that collects the dividends, reports, etc. and
    issues Depository Receipt against these
    shares. Further, the underlying shares are termed as the depository shares.

    TRADING OF DEPOSITORY RECEIPTS:


    In this way shares of a domestic company are traded in the foreign market in the form of
    Depository Receipts.

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