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    ADR&GDR

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    Sunil Kumar
    1. ADRs represent shares of a foreign company that trade on American stock exchanges, while GDRs trade internationally on multiple exchanges. 2. ADRs and GDRs allow investors to purchase shares of foreign companies without having to trade on foreign exchanges or worry about foreign regulations. 3. The key difference is that ADRs trade in the US and GDRs can trade internationally on exchanges like London and Luxembourg. This allows companies to raise capital from global investors.

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    ADR&GDR

    Uploaded by

    Sunil Kumar
    125 views16 pages
    1. ADRs represent shares of a foreign company that trade on American stock exchanges, while GDRs trade internationally on multiple exchanges. 2. ADRs and GDRs allow investors to purchase shares of foreign companies without having to trade on foreign exchanges or worry about foreign regulations. 3. The key difference is that ADRs trade in the US and GDRs can trade internationally on exchanges like London and Luxembourg. This allows companies to raise capital from global investors.

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    1. ADRs represent shares of a foreign company that trade on American stock exchanges, while GDRs trade internationally on multiple exchanges. 2. ADRs and GDRs allow investors to purchase shares of foreign companies without having to trade on foreign exchanges or worry about foreign regulations. 3. The key difference is that ADRs trade in the US and GDRs can trade internationally on exchanges like London and Luxembourg. This allows companies to raise capital from global investors.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    125 views16 pages

    ADR&GDR

    Uploaded by

    Sunil Kumar
    1. ADRs represent shares of a foreign company that trade on American stock exchanges, while GDRs trade internationally on multiple exchanges. 2. ADRs and GDRs allow investors to purchase shares of foreign companies without having to trade on foreign exchanges or worry about foreign regulations. 3. The key difference is that ADRs trade in the US and GDRs can trade internationally on exchanges like London and Luxembourg. This allows companies to raise capital from global investors.

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    ADR & GDR

    By,
    Sunil Kumar. S
    What is ADR
    • ADR- American Depositary Receipts
    A negotiable certificate issued by a U.S. bank
    Represents a specified number of shares of a
    foreign company
    ADRs are denominated in U.S. dollars.
    How does ADR/GDR work ?
    • Let us take Infosys example – trades on the Indian stock at around
    Rs.2000/-
    • This is equivalent to US$ 40 – assume for simplicity
    • Now a US bank purchases 10000 shares of Infosys and issues them in
    US in the ratio of 10:1
    • This means each ADR purchased is worth 10 Infosys shares.
    • Quick calculation means 1 ADR = US $400
    • Once ADR are priced and sold, its subsequent price is determined by
    supply and demand factors, like any ordinary shares.
    ADR RATIO
    • Single
    1 ADR = 1 SHARE
    ADR Ratio = 1:1
     
    • Multiple
    1 ADR = 5 SHARES
    ADR Ratio = 1:5
     
    • Fraction
    1 ADR = ½ SHARE
    ADR Ratio = 2:1
     
    ADR

    TYPES of ADR : ADR listing :


    • Unsponsored ADR NASDAQ
    • Sponsored ADR AMEX
     Level 1 NYSE
     Level 2
     Level 3
    Advantages of ADR

    • It is an easy and cost effective way to buy shares of a foreign company


    • Reduces administrative costs and avoids foreign taxes on every
    transaction
    • Helps companies which are listed to tap the American equity markets
    • Any foreigner can purchase these securities
    • The purchaser has a theoretical right to exchange shares ( non- voting
    right shares for voting rights)
    GDR – Global Depositary Receipts

     A bank certificate issued in more than one country for shares in a


    foreign company

     Offered for sale globally through the various bank branches

     Shares trade as domestic shares


    GDR – CUSTODIAN BANK –
    DEPOSITORY BANK

    • Custodian Bank located in same country


    • Works with the Depository Bank and follows instructions
    from the depository bank.
    • Collects, remits dividends and forwards notices
    received from the depository bank.
    GDR MARKET

    • GDRs can be created or cancelled depending on demand and suply


    • When shares are created, more corporate stock is placed in the
    custodian bank in the depositary bank account
    • The depositary bank then issues the new GDRs

    • Factors governing GDR prices are company track record, analysts


    recommendations, relative valuations, market conditions and also
    international status of the company
    GDR Listing

    • London Stock Exchange


    • Luxembourg Stock Exchange
    • DIFX
    • Singapore Exchange
    • Hong Kong Exchange
    GDR- Advantages and
    Dis-advantages
    • GDRs allow investors to invest in foreign companies without
    worrying about foreign trading practices, laws
    • Easier trading, payments of dividends are in the GDR currency
    • GDRs are liquid because they are based on demand and supply which
    is regulated by creating or cancelling shares
    • GDR issuance provides the company with visibility, more larger and
    diverse shareholder base and the ability to raise more capital in
    international markets
    • However, they have foreign exchange risk i.e. currency of issuer is
    different from currency of GDR
    In Simple terms - ADR / GDR ISSUE

    COMPANY SHARE

    DEPOSITARY BANK

    INVESTOR
    Difference between ADR and
    GDR
    • Both ADR and GDR are depository receipts, and represent a claim on
    the underlying shares. The only difference is the location where they
    are traded.

    • Depositary receipts traded in USA – ADR

    • Depositary receipts traded in a country other than USA - GDR


    India- ADR and GDR

    • ADRs and GDRs are an excellent means of investment for NRIs and
    foreign nationals wanting to invest in India
    • By buying these, they can invest directly in Indian companies without
    going through the hassle of understanding the rules and working of the
    Indian financial market – since ADRs and GDRs are traded like any
    other stock
    • NRIs and foreigners can buy these using their regular equity trading
    accounts
    Indian Companies using ADR/GDR
    COMPANY ADR GDR
         
    Bajaj Auto No Yes
    Dr. Reddys Yes Yes
    HDFC Bank Yes Yes
    Hindalco No Yes
    ICICI Bank Yes Yes
    Infosys Technologies Yes Yes
    ITC No Yes
    L&T No Yes
    MTNL Yes Yes
    Patni Computers Yes No
    Ranbaxy Laboratories No Yes
    Tata Motors Yes No
    State Bank of India No Yes
    VSNL Yes Yes
    WIPRO Yes Yes

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