|

 |


  
    

| 

 
 Depository receipt
‡ A depositary receipt is a negotiable certificate of
ownership of shares in a foreign company
traded in USA through a US depository bank.

‡ . Depositary Receipts are created when a broker

purchases the company's shares on the home
stock market and delivers those to the
depositary's local custodian bank, which then
instructs the depositary bank.
 _istory of depository receipt
‡ American Depositary Receipts have been
introduced to the financial markets as
early as April 29, 1927.by famous British
retailer.
‡ The ADR was listed on the New York Curb
Exchange.
‡ regulation of ADR changed its form in
1955,
 Cont«
‡ In December 1990, Citibank introduced
the first Global Depositary Receipt.
 Issuer

Issue of share

Global sale Domestic sale

Deposit of share
Domestic custodian bank
Issue of DR
Lead manager
Sale of DR
Domestic banker
Overseas custodian bank
Sales of DC
Overseas banker
Global investors

Global stock trading Intra marketing trading

 GDR
‡ GDRs are securities available in one or
more markets outside the company¶s
home country.
‡ The basic advantage of the GDR.
‡ They gained popularity also due to the
flexibility of their structure.
 ADR
‡ Companies have a choice of four types of Depositary
Receipt facilities:
‡ Unsponsored Depositary Receipts:- are issued by one
or more depositaries in response to market demand,
Today, unsponsored Depositary are no longer
established due to lack of control over the facility and its
hidden costs.

‡ Sponsored Depositary Receipts:- are issued by one

depositary appointed by the company under a Deposit
Agreement or service contract. Sponsored Depositary
Receipts offer control over the facility, the flexibility to list
on a national exchange in the U.S. and the ability to
raise capital.
 IDR

‡ An IDR is an instrument denominated in Indian

Rupees in the form of a depository receipt
created by a Domestic Depository against the
underlying equity of issuing company to enable
foreign companies to raise funds from the Indian
securities Markets.
‡ Standard Chartered plc is the first foreign
company to have publicly elicited interest in
making an IDR issue in India.
 Eligibility of issue for IDR
‡ it has net tangible assets of at least Indian
Rupee three crore.
‡ the issuing company is listed in its home
country.
‡ he issuing company is not prohibited to
issue securities by any regulatory body.
 Benefits
‡  
‡ Currently, there are over 2,000 Depositary
Receipt programs for companies from over 70
countries. The establishment of a Depositary
Receipt program offers numerous advantages to
non-U.S.companies.
‡ The primary reasons to establish a Depositary
Receipt program can be divided into two broad
considerations: capital and commercial.
‡    
‡ investors aim to diversify their portfolios internationally.
‡ Quotation in U.S. dollars and payment of dividends or
interest in U.S. dollars.
‡
!
1. undependable settlements,
2. costly currency conversions
3. poor information flow,
4. unfamiliar market practices,
5. confusing tax conventions and internal investment
policy discourage institutions and private investors from
venturing outside their local market.