Indian Depository

Receipts (IDR)
 What is Depository Receipts?
A Depository Receipts (DR) is a type of negotiable
(transferable) financial security that is traded on a
local stock exchange but represents a security,
usually in the form of equity, that is issued by a
foreign publicly listed company. The DR, which is a
physical certificate, allows investors to hold shares
in equity of other countries.
E.g.. American Depository receipt (ADR), Global
Depository Receipts (GDR).
 What is IDR?
An IDR is an instrument in the form of a
Depository Receipt created by the Indian
Depository in India against the underlying
equity shares of the issuing company in
order to enable foreign companies to raise
funds from the Indian markets.
 Introduction in India
• 1st step:- Section 605A of the companies
act,1956
• 2nd Step:- Companies (Issue of Indian
Depository Receipts) Rules, 2004
• 3rd Step:- Chapter VIA of the SEBI
(Disclosure & Investor Protection)
Guidelines.
 Principal parties in the IDR issue are the
issuer company
• Issuer Company 

• Domestic Depository

• Overseas custodian

• Registrar and Transfer Agent (R&T Agent) 

 Why do you need an IDR?
Reasons:-
• Diversify Holding across regions
• Risk of portfolio getting concentrated in the
home market.
• Exchange rate risks are reduced
• Acquire shares of global companies
• Allow global companies to access funds at
cheaper costs.
 Who can issue IDR?
. Eligibility criteria for issue of IDRs .
• it has net tangible assets of at least Indian Rupee three
crore in each of the preceding three full years.
• it has a track record of distributable profits.
• it has a net worth of at least INR one crore in each of
the preceding three full years.
• if it has changed its name within the last one year, at
least fifty per cent. of the revenue for the preceding
one full year has been earned by it from the activity
indicated by the new name.
Continued……
• a foreign company intending to make an issue of
IDRs
• the issuing company is listed in its home country.
• the issuing company is not prohibited to issue
securities by any regulatory body.
• the issuing company has track record of
compliance with securities market regulations in
its home country.
 How it will work?
• Draft Prospectus is filed with SEBI
• Issue fee is paid
• Issuing Company will obtain necessary
permission & exemption from the country of
its incorporation & appoint an overseas
custodian bank for issue
• Deliver the underlying shares to overseas bank
• Trading & settlement will be similar to those of
Indian shares
 Who can invest in IDR?
• Indian Companies
• Qualified Institutional Buyers
• NRI’s and FII’s with permission of the
Reserve Bank of India
 Benefits of IDR.
• Indian investors gets chance to invest in
foreign entity
• Easier Access to IDR’s than shares
• Benefits of shares accrue to IDR’s also
• International issuers
• Branding
• Management Pool
• Reserve a proportion for employees
 Limitations of IDR
• Stringent eligibility norms
• Fungibility
• Tradability of IDR’s
• Returns on IDR’s
• Risks
• Taxation
• Voting Rights
• Market
 DISCLOSURES
• – Contents of prospectus
• – Risk factors and management perception
• – Market price information in home country
• – Dividend Policy
• – History of Exchange Rates in home country
• – Foreign investment and Exchange Controls in
Home Country
• – Capital structure
• – Financial information
Thank you..