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DEPOSITORY RECEIPTS
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INTERNATIONAL CAPITAL MARKET
EURO
BOND
FOREIGN
BOND
GDR
ADR
AMERICAN DEPOSITORY
RECEIPTS
Domestic
Custodian bank
(SBI)
Share
Certificate
Confirmation
Foreign
Depository
(Morgan
Stanley)
Issue of DR
GDR/ADR Holders
(Bank Of America)
Payment
Dividend
Clearing Agency
(Euro Clear)
Foreign Stock
Exchange
(NYSE)
Advantages Of ADR/GDR
The ODB should request DCB to get the corresponding underlying shares
released in favor of non resident of investors. (Shareholders of issuing
companies).
Types of ADR
SPONSORED ADR
UNSPONSORED ADR
Issued by broker/dealer or
depository bank without the
involvement of company whose
stock underlies the ADR
No regulatory reporting
Listing on international
StockExchanges allowed.
Levels of ADR
Level 1 ADRs:
Level 1 ADRs are the lowest level of sponsored ADRs and also the simplest
method for companies to access the US capital markets.
The issuing company does not have to comply with US generally accepted
accounting principles (GAAP) or provide US Securities and Exchange
Commission (SEC) disclosure.
Companies that have level 1 ADRs may upgrade to level II or level III ADR
program.
Level II ADRs:
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Level II ADRs require full registration with the Securities and Exchange
Commission. Companies must also meet the requirements of the
appropriate stock exchange.
Level II ADRs require a form 20-F and form F-6 to be filled with the SEC,
as well as meeting the listing requirements and filing a listing application
with the designated stock exchange. Upon F-6 effectiveness and approval
of the listing application, the ADRs begin trading.
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level III ADRs enable companies to list their ADRs on Nasdaq, the Amex, the
NYSE or the OTC Bulletin Board and make a simultaneous public offering of
ADRs in the united states
The benefits of level III ADRs are substantial; it allows the issuer to raise
capital and leads to much greater visibility in the U.S market.
Level III ADR programs must comply with various SEC rules, including the full
registration and reporting requirements of the SEC's Exchange Act.
Pricing of ADR/GDR
Avg weekly (high & low) closing prices in the last six months.
Avg weekly (high & low) closing prices in the last two weeks.
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GLOBAL DEPOSITORY
RECEIPTS
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A bank certificate issued in more than one country for shares in a foreign
company. The shares are held by a foreign branch of an international
bank. The shares trade as domestic shares, but are offered for sale
globally through the various bank branches.
The voting rights of the shares are exercised by the Depository as per
the understanding between the issuing company and the GDR holders.
Types of GDR
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Rule 144A GDRs are privately placed depositary receipts which are issued and
traded in accordance with Rule 144A. This rule was introduced by the SEC in
April 1990 in part to stimulate capital raising in the US by non-US issuers.
Regulation S
Just as ADRs allow non-US issuers to access the important US market, GDRs
allow issuers to tap the European markets.
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GDR
ADRs up to level I need to accept only GDRs can only be issued under rule 144 A
general condition of SEC of USA.
after accepting strict rules of SEC of USA .
ADR is only negotiable in USA .
Investors of USA can buy ADRs from New Investors of UK can buy GDRs from London stock
exchange and luxemberg stock exchange and
york stock exchange (NYSE) or NASDAQ
invest in Indian companies without any extra
responsibilities .
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COMPANY
ADR
GDR
Bajaj Auto
No
YES
Dr Reddys
YES
YES
HDFC Bank
YES
YES
ICICI bank
YES
YES
ITC
NO
YES
L&T
NO
YES
MTNL
YES
YES
HINDALCO
NO
YES
INFOSYS TECHNOLOGIES
YES
YES
TATA MOTORS
YES
NO
PATNI COMPUTERS
YES
NO
SBI
NO
YES
WIPRO
YES
YES
VSNL
YES
YES
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These are financial instrument that allows foreign companies to mobilize funds
from Indian capital market.
IDRs are the depository receipts dominated by Indian issued by the domestic
depository receipt.
Like equity shares, these are unsecured instruments & negotiable from one to
another investors.
NRIs.
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Intermediaries involved in
issuance of IDR
Overseas custodian
Domestic depository
Merchant banker
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Eligibility Criteria
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Requirements
Capital
Pre issue paid up capital and free reserve are at least US$ 50
million.
Market capitalization
Operation history
Track
record
of Track record of distributable profits in terms of section 205 of
distributable profits the companies act. 1956 for at least 3 out of immediately
preceding 5 years.
Other requirements
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Minimum 50% of the issue should be allotted qualified institutional buyers (QIB).
30% of the issue should be offered to retail individual investors (RIB) including
employees.
Extent of issue- The no. of underlying issue shares offered in a financial year
through IDR offering shall not exceeds 25% of the post issue no. of equity share of
the company.
Limits of Investment
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Procedures
Pre- listing
Offering process
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Issuing companies.
Investors.
Employees.
Regulators.
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