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Submitted byRaja Kumar Naik (32)Venkata Ashok (44)Vicky Kumar (45)

ADRs and GDRs

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Depository ReceiptA negotiable financial instrument issued by a

bank to represent a foreign company's publiclytraded securities.

The depositary receipt trades on a local stockexchange.

Allows investors to hold shares in equities ofother countries

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ADRA negotiable certificate issued by a U.S. bank

representing a specified number of shares (orone share) in a foreign stock that is traded on aU.S. exchange.

ADRs are denominated in U.S. dollars, with theunderlying security held by a U.S. financialinstitution overseas

ADRs are first introduced in 1927 by J P Morgan

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ADR US investors invest in foreign companies

Gain Dividends and Capital gains in US dollars

Reduce administration and duty costs that wouldotherwise be levied on each transaction.

Do not eliminate the currency and economic risksfor the underlying shares in another country

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Issue of ADR Bank studies the financials of company

Bank buys shares of the company

Shares are grouped in packets ADR ratio

For example ADR ratio 5:1 implies 5 shares indomestic market equals 1 ADR

Each packet is issued as an ADR

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Pricing of ADR Pricing depends on the price of underlying share

in the foreign market

With ADR ratio 5:1, if in foreign market shareprice is $1 in US it will be $5

price movements are influenced by

- demand supply forces,

- the condition of the foreign

countrys economy,- the prospects for the company

- and several other factors

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Types of ADR Unsponsored

With out the involvement of foreign company

No share holder rights

Sponsored

Contract between foreign company and bank

Grants shareholder rights

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Types of ADR Level 1 (OTC ADR)

Not listed on any US exchange

Companies that don not qualify

Companies that chose not to list on exchange

Level 2 (Listed ADR)

Listed on NASDAQ and NYSE

Stricter SEC regulations

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Types of ADR Level 3 (Public Issue)

Offered through a public issue by bank

Company can raise substantial funds

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Companies

Indian ADR Trading in US

ADR ISSUE SYMBOL INDUSTRY EXCHDR. REDDY'S LABORATORIES LTD. RDY Pharmaceutical NYSE

HDFC BANK LTD. HDB Banks NYSE

ICICI BANK LTD. IBN Banks NYSE

INFOSYS TECHNOLOGIES LIMITED INFY Technology Services NASDAQ

MAHANAGAR TELEPHONE NIGAM LIMITED MTE Fixed Line Comm. NYSE

REDIFF.COM INDIA LTD REDF Technology Services NASDAQ

SATYAM COMPUTER SERVICES LIMITED SAY Technology Services NYSE

SIFY LTD. SIFY Technology Services NASDAQ

VIDESH SANCHAR NIGAM LIMITED VSL Fixed Line Comm. NYSE

WIPRO LTD. WIT Technology Services NYSE

http://www.drreddys.com/http://www.wipro.com/http://www.wipro.com/http://www.vsnl.com/http://www.vsnl.com/http://www.sify.com/http://www.sify.com/http://www.satyam.com/http://www.satyam.com/http://www.rediff.com/http://www.rediff.com/http://www.mtnl.net.in/index.htmhttp://www.mtnl.net.in/index.htmhttp://www.infosys.com/http://www.infosys.com/http://www.icicibank.com/http://www.icicibank.com/http://www.hdfcbank.com/http://www.hdfcbank.com/http://www.drreddys.com/http://www.drreddys.com/

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GDRs: Global Depository Receipts

A bank certificate issued in more than one country forShares in a foreign company

Offered for sale globally through the various bank

branches

Shares trade as domestic shares

GDRs allow investors to invest in foreign companieswithout worrying about foreign trading practices, laws

Easier trading, payments of dividends are in the GDR

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GDR is usually listed on European stock exchanges suchas the London Stock Exchange.

Both ADRs and GDRs are usually denominated in U.S.dollars, but can also be denominated in Euros.

GDR issuance provides the company with visibility morelarger and diverse shareholder base

Ability to raise more capital in international markets

Have foreign Exchange Risk i.e. currency of issuer is

different from currency of GDR

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GDR CUSTODIAN BANK-:DEPOSITORY BANK

Custodian Bank located in same country

Works with the Depository Bank and followsinstructions from the depository bank.

Collects, remits dividends and forwards noticesreceived from the depository bank.

GDRs can only be issued under rule 144 A afteraccepting strict rules of SEC of USA

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advantages

GDRs allow investors to invest in foreign companieswithout worrying about foreign trading practices, laws

Easier trading, payments of dividends are in the GDRcurrency

GDRs are liquid because they are based on demandand supply which is regulated by creating orcancelling shares

GDR issuance provides the company with visibility,more larger and diverse shareholder base and theability to raise more capital in international markets

However, they have foreign exchange risk i.e.

currency of issuer is different from currency of GDR

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PROCESS FOR ADR/GDR

DOMESTIC CUSTODIANBANK

Has a custody of Indiancompany equity shares

INDIANCOMPANY

OVERSEAS DEPOSITORYBANK

INVESTORS

Release Equity Shares

Give Instructions to IssuesADRs/GDRs

IssueADRs/GDRs

Requests for buyingADRS/GDRS

Requests the bankto release of Equity Shares

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India- ADR and GDR

ADRs and GDRs are an excellent means of investmentfor NRIs and

Foreign nationals wanting to invest in India

By buying these, they can invest directly in Indian

companies without going through the hassle ofunderstanding the rules and working of the

Indian financial market since ADRs and GDRs are tradedlike any other stock

NRIs and foreigners can buy these using their regularequity trading accounts

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CompaniesGDR companies Size of GDR (US $mn) Shares per GDR GDR issue price (US $)

Arvind Mills 125 1 9.78

Crompton Greaves 50 1 7.56

Dr. Reddy's 48 1 11.16m

GAIL 22.5 6 9.67

Hindalco (1st) 72 1 10.73

Hindalco (2nd) 100 1 16

ICICI 230 5 11.5

Infosys 70.38 0.5 34

MTNL 418.53 2 11.958

Reliance 150 2 16.35

Reliance (2nd) 300 2 23.5

SBI 369.95 2 14.15

VSNL 527 0.5 13.93