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ADR GDR IDR 2003

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ADR, GDR & IDR Presented By: Sanket Advilkar (01) Amey Bhagat (05) Amit Mittal (19) Jerin John (52) Rupali Indap Subject: Derivatives
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Page 1: ADR GDR IDR 2003

ADR, GDR & IDR

Presented By:

Sanket Advilkar (01)

Amey Bhagat (05)

Amit Mittal (19)

Jerin John (52)

Rupali Indap (108)

Subject: Derivatives

Page 2: ADR GDR IDR 2003

Depository Receipts

It is a type of negotiable (transferable) financial security

It is usually in the form of equity, which is issued by a foreign publicly listed company

It is a Physical Certificate

It allows investors to hold shares in equity of other countries

Page 3: ADR GDR IDR 2003

Major Players in DR

Corporate Issuer

Register & Transfer Agent

Overseas Custodian

Domestic Depository

DRHolder

Page 4: ADR GDR IDR 2003

Process of Issuing DR

Receipts Given to the Foreign Investors

Page 5: ADR GDR IDR 2003

AMERICANDEPOSITORY

RECEIPT(ADR)

Page 6: ADR GDR IDR 2003

What is ADR ? An  ADR represents ownership in the shares of a non-U.S. company

and trades in U.S. financial markets

ADR’s are quoted and traded in U.S. Dollars in the US securities market. Also, the dividends are paid to investor in US dollars

ADRs were first introduced in year 1927

ADRs are traded on NYSE, NASDAQ & AMEX in USA

Page 7: ADR GDR IDR 2003

Types of ADR

Page 8: ADR GDR IDR 2003

Unsponsored ADRsCreated in response of investors, brokers - dealers and

depositoryExempted from reporting requirements of the SECNot Listed on any exchange

Advantages:InexpensiveExpands investors baseMinimal SEC compliance and reporting requirements

Disadvantages: No control over the

activity Conversion becomes

costly

Page 9: ADR GDR IDR 2003

Sponsored ADRs Initiated by Issuer

Established jointly by an Issuer and Depository

Depository provides shareholders communication and other information to ADR holders

Through Depository ADR holders can exercise voting rights

Page 10: ADR GDR IDR 2003

Level I Level II Level III

Least Expensive More Expensive Most Expensive

Minimal SEC registration & reporting requirements.

Full SEC registration & reporting requirements.

SEC reporting is more detailed than Level II.

Cannot be listed on National exchange of US.

Listed on National exchange of US.

Listed on National exchange of US.

Capital Raising is not permitted.

Capital Raising is not permitted.

Capital can be raised through Public offering.

Page 11: ADR GDR IDR 2003

Private PlacementsCapital can be raised by placing Depositary Receipts

with large institutional investors

Do not have to conform full SEC reporting and registration requirements

Cheaper means of raising equity capital

Can only be sold to QIBs

Page 12: ADR GDR IDR 2003

Indian ADR

Page 13: ADR GDR IDR 2003

GLOBALDEPOSITORY

RECEIPTS(GDR)

Page 14: ADR GDR IDR 2003

What is GDR ? GDR is a certificate issued by a depository bank, which purchases

shares of foreign companies

GDR can be traded globally in exchange or over the counter market & it is a global funding vehicle for raising capital

Normally 1 GDR = 10 Shares

GDR does not provide voting rights

Biggest Asian GDR was issued by SBI in 1997 for US $ 350 million

Page 15: ADR GDR IDR 2003

Process of GDR

Page 16: ADR GDR IDR 2003

GDR Listing

London Stock ExchangeLuxembourg Stock ExchangeDubai International Financial Exchange (DIFX)Singapore ExchangeHong Kong Exchange

Page 17: ADR GDR IDR 2003

GDR: Advantages & Disadvantages Allow investors to invest in foreign companies without worrying about

foreign trading practices & laws

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

Provides the Issuer 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

Page 18: ADR GDR IDR 2003

Indian Companies Issuing GDR Bajaj Auto

Dr. Reddys

HDFC Bank

Hindalco

ICICI Bank

Infosys Technologies

ITC

L & T

MTNL

Reliance Industries

State Bank of India

VSNL

Wirpo

TATA Motors

Page 19: ADR GDR IDR 2003

ComparisonGDR

Centre – NYSE

GAAP – Company accounts must be reconciled to US GAAP

Cost – Comparatively higher

Retail – US retail market can be accessed

Liability – Legal liability is more

Centre – LSE

GAAP – Satisfied with Statement of difference between the A/c Standards

Cost – Comparatively lower

Retail – Only QIBs allowed in US

Liability – Comparatively less than ADR

ADR

Page 20: ADR GDR IDR 2003

INDIANDEPOSITORY

RECEIPT(IDR)

Page 21: ADR GDR IDR 2003

What is IDR ? IDRs are depository receipts denominated in Indian Rupees

issued by a Domestic Depository in India

The US $ 200,000 limit is not applicable for an investment in IDRs

An IDR holder will be entitled to rights on an equitable basis vis-à-vis the rights of shareholders of the issuer company in its home country.

Fungibility: Reverse fungibility is not allowed

Page 22: ADR GDR IDR 2003

Process of IDR

Issuer of IDRs to Investors in India

Holds

Shares for Domestic Depository

IDRs listed on NSE / BSE

Shares

Page 23: ADR GDR IDR 2003

Who Can Invest? Retail Individual Investors (incl NRIs)

Non-Institutional Investors (“NIIs”) (incl NRIs)

Qualified Institutional Buyers (“QIBs”)

Scheduled commercial banks

Mutual Funds

Foreign Institutional Investors

Indian Institutional investors except Insurance

companies, venture capital funds

RetailIndividualInvestors

30%

Page 24: ADR GDR IDR 2003

India’s First Ever IDR: Stan ChartRaised Rs. 2490 crore ($530) million through issue of 24

crore IDRs

Initial issue price was Rs. 104 but it was listed at Rs 106, exceeded expectations by Rs 2 on the NSE

It was subscribed 1.38 times

Every 10 IDR = 1 share of SC

Page 25: ADR GDR IDR 2003

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