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Presented By
Ghanshyam Meena(026)
Aftab Alam(047)
Rajat Gayal(068)
Sukhdev Boipoi(078)
 

_ antroduction to depository receipts
_ Salient features of ADR & GDR
_ Parties involved in the issue
_ Working mechanism
_ Regulatory mechanism
_ ADR and its types
_ GDR
_ ADR v/s GDR
_ Advantages to investors and issuing company
_ Recent developments in andia anc over ADR & GDR
 



_ A depositary receipt (DR) is a type of negotiable
(transferable) financial security that is traded on a
local stock exchange. at represents a security, usually
in the form of equity that is issued by a foreign
͚publicly listed͛ company
_ The DR, which is a physical certificate, allows
investors to hold shares in equity of other countries
_ ADR and GDR are two most common type of DR
 ï



  
 listed and traded on foreign Stock Exchange
ADRs - NYSE, NASDAQ etc.
GDRs - Luxembourg, London Stock Exchange, Over the
counter market in London

ͻ No voting rights

ͻ 
  reely transferable and tradable in the overseas market



ï
- GDR/ADR holder has an option to

redeem the GDRs/ADRs into the equity shares underlying it.

an the case of redemption, the Depository will request the

Custodian to get the corresponding underlying shares released in
favour of the non-resident investor. A copy of the same will
be sent to the assuer Company for information and record.
 ï



  !""

   Dollars or some other freely convertible currency.
Underlying shares are however denominated in rupees

ͻ  
  an Rupees only but Depository converts rupees and pays

dividend to ultimate investor in US dollars. Thus, no exchange rate risk for
assuer Company

ͻ ï
 af an investor desires to sell GDRs/ADRs held by him/her, he/she can

request the Depository who will forward the same to the Custodian
to release and sell such shares underlying the ADRs/GDRs and
remit the sales proceeds to the investor



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- The underlying shares are listed on a
domestic stock exchange. The underlying shares are denominated in
andian currency only
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! $Company that plans to tap the oreign
market through the global issue mechanism

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%$A Banking Company
which acts as a Custodian for the ordinary shares

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¢ Overseas agent of the assuer Company .
¢ Registered owner of shares. ats name appears in the
Register of Members of the assuer
¢ Assist with stock exchange compliance
¢ Registration and reporting requirements
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ͻ Responsible for marketing the issue

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ͻ Manage the entire transaction, including overall co-ordination
ͻ antroduce company to institutional investor client base
ͻ Conduct road show with management
ͻ Pricing and general marketing of the offer

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ͻ Prepare financial statements in accordance with recognized GAAP

ͻ Prepare and review financial sections, stock exchange disclosure
filings and offering circulars
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ͻ Prepare and file required documents for securities commission of listing venue
ͻ Manage compliances with Securities Laws, Rules & Regulations
ͻ Prepare offering circular/prospectus with the working parties

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ͻ Assistance in preparation of prospectus, depository agreement, indemnity agreement and
subscription agreement.
ͻ Enabling the assuer to comply with proper disclosures relating to the issue
ͻ Advise Company/underwriters on compliances with domestics regulation relating to DR
issuance

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ͻ Printers
ͻ Stock Exchange
ͻ Custodian
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!  (Banking Co. situated in
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 andia which has the

(Through Lead physical possession of
Manager) shares underlying
GDRs/ADRs)

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assue of shares requires the filing of an Offering
Circular with SEBa for its information and records

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an principal approval from the Stock Exchanges in andia where
the shares of the Company are listed, is required to be
obtained prior to listing on the Overseas Exchange.

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assuer must obtain the consent of the financial
institutions/banks if it has obtained any financial facilities
(term loans, guarantees etc.)
 
An American Depositary Receipt (abbreviated ADR) represents
ownership in the shares of a non-U.S. company that trades in U.S.
financial markets

ADRs enable US investors to buy shares in foreign companies

without hazards or inconveniences of cross border & cross
currency transactions

ADRs carry prices in US dollars, pay dividends in US dollars, and

can be traded like the shares of US-based companies
 

Unsponsored Sponsored Rule 144A

ͻ Very rare ͻ anitiated by issuer ͻ Private placement

ͻ Not listed ͻ Deposit agreement ͻ Placing DR with
ͻ Lack qualifications between anstitutional
ͻ Created by Depository & assuer anvestors (QaB)
anvestment Bank ͻ Listed on ͻ No reporting
ͻ Exempted from Exchanges requirements
Reporting ͻ Voting rights to ͻ Can be sold to
requirements ADR holder other QaBs only
ͻ Cheaper way of ͻ Communication ͻ No trading on
expansion through Depository exchanges or OTC
Bank
 -

 


Level 1 Level 2 Level 3

ͻ Least Expensive ͻ More Expensive ͻ Most Expensive

ͻ Minimal SEC ͻ ull SEC ͻ SEC registration
registration & registration & & reporting is
reporting reporting more detailed.
requirements requirements ͻ Listed on
ͻ Can not be ͻ Listed on National
listed on National Exchange of US
National Exchange of US
Exchange of US
 
_ A GDR is similar to an ADR, but is a depositary receipt sold
outside of the United States and outside of the home country
of the issuing company

_ Most GDRs are, regardless of the geographic market,

denominated in United States dollars, although some trade in
Euros or British sterling

_ There are more than 900 GDR͛s listed on exchanges

worldwide, with more than 2,100 issuers from 80 countries
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 Easier trading
 The payment of dividends in the GDR currency, which is usually
the United States dollar (USD).
 Corporate notifications, such as shareholders͛ meetings and
rights
 Another major benefit to GDRs is that institutional investors can
buy them, even when they may be restricted by law or
investment objective from buying shares of foreign companies.
Currently, the stock exchanges trading GDRs are:
1. London Stock Exchange
2. Luxembourg Stock Exchange
3. Dubai anternational inancial Exchange (Da
)
4. Singapore Stock Exchange
5. Hong Kong Stock Exchange
! 
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ͻ GDRs/ADRs are designated in foreign currency which is
more acceptable to global investors

ͻ Global investors/holders of GDRs/ADRs need not be

registered with SEBa

ͻ The identity of GDR/ADR holders is kept confidential

since they are freely transferable and in the records of the
assuer Company, the name of the Overseas Depository
appears as Registered Owner of shares

ͻ Quick settlement of GDRs/ADRs due to the existence of

international systems like, Euroclear and Cedel in Europe
and the Depository Trust Company in the U.S.
  
#
 

! 
ͻ The assuer Company collects the issue proceeds in
foreign currency and is thus able to utilize the same for
meeting the foreign exchange component

ͻ Large amounts can be raised in the global market at cheaper

rates

ͻ There is certainty of raising new capital and the issue terms

are much better than those which can be obtained in the local
market
 



ͻ 
 
#
$
 Xï23Mn worth of GDR at Rs.
10 per share on the Singapore exchange . at has already
acquired two companies in US and
in process of acquiring 3 others in andia
ͻ %ï* 
$ 
Xï45"43 via GDR issue as of
Jan 08
ͻ 
  %$ 
Xï56"74 through GDRs as of Jun
08, listed on the Luxembourg Stock Exchange
ͻ ,

*
$ 
Xï400 Mn in Jul 2007,
listed on the Luxembourg Stock Exchange.