ADR GDR IDR 2003
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Transcript of 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
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
Major Players in DR
Corporate Issuer
Register & Transfer Agent
Overseas Custodian
Domestic Depository
DRHolder
Process of Issuing DR
Receipts Given to the Foreign Investors
AMERICANDEPOSITORY
RECEIPT(ADR)
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
Types of ADR
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
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
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.
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
Indian ADR
GLOBALDEPOSITORY
RECEIPTS(GDR)
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
Process of GDR
GDR Listing
London Stock ExchangeLuxembourg Stock ExchangeDubai International Financial Exchange (DIFX)Singapore ExchangeHong Kong Exchange
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
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
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
INDIANDEPOSITORY
RECEIPT(IDR)
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
Process of IDR
Issuer of IDRs to Investors in India
Holds
Shares for Domestic Depository
IDRs listed on NSE / BSE
Shares
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%
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