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ADR, GDR & IDR

DEPOSITORY RECEIPTS

Depository receipts are instruments issued by international depositories

(ODB), and they represent an interest in the underlying shares held by them
in the issuer company (Indian Company). The shares are usually held by a
domestic custodian on behalf of the depositories in turn issue the depository
receipts, which entitle the holder of the receipts to get the underlying shares
on demand.

DRs are traded on Stock Exchanges in the US, Singapore, Luxembourg,

London, etc.

DRs listed and traded in US markets are known as American Depository

Receipts (ADRs) and those listed and traded elsewhere are known as Global
Depository Receipts (GDRs). In Indian context, DRs are treated as FDI.

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INTERNATIONAL CAPITAL MARKET

INTERNATIONAL BOND MARKET

EURO
BOND

FOREIGN
BOND

INTERNATIONAL EQUITY MARKET

GDR

ADR

AMERICAN DEPOSITORY
RECEIPTS

ADR is a dollar-denominated negotiable certificate. It represents a non-US

companys publicly traded equity. It was devised in the late 1920s to help
Americans invest in overseas securities and to assist non-US companies
wishing to have their stock traded in the American Markets.

ADR were introduced as a result of the complexities involved in buying

shares in foreign countries and the difficulties associated with trading at
different prices and currency values.

Process to Issue ADR/GDR

Issuing
Company
(RIL)

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

Can be listed on any of the overseas stock exchanges /OTC/Book entry

transfer system.

Freely transferable by non-resident.

They can be redeemed by ODB.

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 with cooperation of the

company whose stock will underlie
the ADR

Issued by broker/dealer or
depository bank without the
involvement of company whose
stock underlies the ADR

Comply with regulatory reporting.

No regulatory reporting

Listing on international
StockExchanges allowed.

Trade on OTC market

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.

Level 1 ADRs are traded in the over-the counter (OTC) market.

The issuing company does not have to comply with US generally accepted
accounting principles (GAAP) or provide US Securities and Exchange
Commission (SEC) disclosure.

Level 1 ADRs essentially enable a company to obtain the benefits of a US

publicly traded security without altering their current reporting process.

Companies that have level 1 ADRs may upgrade to level II or level III ADR
program.

They require minimal SEC registration.

Level II ADRs:

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Level II ADRs enable companies to list their ADRs on Nasdaq, the

American Stock Exchange, the New York Stock Exchange and the OTC
bulletin board, thereby offering higher visibility in the US market, more
active trading and greater liquidity.

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.

Level III ADRs:

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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

Should not be less than higher of the two following

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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Issue related expenses: should not exceed

4%--- in case of GDR

7%----in case of ADR

2%----Private placement of ADRs/GDRs.

There are no end-use restrictions on GDR/ADR issue proceeds, except for

an express ban on investment in real estate and stock markets.

Trading Depositary Receipts

BUYING

Source: Depositary receipts information guide; CITIGROUP

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India's STERLITE INDUSTRIES LTD

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Raised $1.75 billion

ADSs that were offered: 130,440,000 ADSs
Offering price: $13.44 per ADS
Underwriters: Merrill Lynch, Fenner & Smith Inc, Morgan Stanley & co. intl plc,
and Citigroup, Global markets Inc
Depositary for the ADS: Citibank, N.A.
Total expenses of the offering excluding
Underwriting discounts & commissions: $ 9.0 million
Registration fees: $ 0.1 million
Printing fees: $1.6 million
Estimated legal fees: $ 2.5 million
Accounting fees: $2.0 million
Note: - Underwriters pay for their own legal fees

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.

A financial instrument used by private markets to raise capital

denominated in either U.S. dollars or Euros.

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

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.

Non-US companies now haveready access to the US equity private placement

market and may thus raise capital through the issue of Rule 144A GDRs without
complying with the stringent SEC registration and reporting requirements.

Regulation S

With the global integration of the major securities markets, it is now

commonplace to have fungible securities listed and cleared in more than one
market.

Just as ADRs allow non-US issuers to access the important US market, GDRs
allow issuers to tap the European markets.

Difference Between ADR & GDR

ADR

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GDR

American depository receipt (ADR) is Global depository

receipt
(GDR)
is
compulsory for non us companies to trade compulsory for foreign company to access
in stock market of USA.
in any other countrys share market for
dealing in stock.
ADRs can get from level 1 to level III.

GDRs are already equal to high preference

receipt of level II and level III.

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 .

GDR is negotiable instrument all over the

world

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 .

Which INDIAN companies have

ADR & GDR

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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

INDIAN DEPOSITORY RECEIPTS

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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.

Represents interest in the share of non-Indian companys equity.

Like equity shares, these are unsecured instruments & negotiable from one to
another investors.

It provides chance to Indian investors to hold equity shares of foreign companys.

Who can Invest?

Any person who is resident in India as defined under FEMA.

NRIs.

SEBI registered foreign institutional investor including their sub

accounts.

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Intermediaries involved in
issuance of IDR

Overseas custodian

Domestic depository

Merchant banker

Registrar and transfer agent

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Eligibility Criteria

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As per the companies IDR rules

Criteria

Requirements

Capital

Pre issue paid up capital and free reserve are at least US$ 50
million.

Market capitalization

Minimum average market capitalization (during the last 3

years) in its parent country of at least US$ 100 million.

Operation history

Continuous trading record or history on a stock exchange in its

parent country at least 3 immediately preceding years.

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

Fulfil such other eligibility criteria as may be laid down by SEBI

from time to time in this behalf.

Allocation of the Issues

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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.

Balance 20% to be appointed between Non-institutional investors (NII).

Issue Size- Issue shall not be less then 50crore.

Minimum application amount- Shall be 20,000.

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

RII- Minimum of 20,000 of and maximum of 1,00,000.

NII- Above 1,00,000 and up to the issue size

QIB-Above 1,00,000 and up to the issue size.

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Procedures
Pre- listing

Offering process

Eligibility criteria & public offering

Listing on stock Exchange

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Benefits to the Key Stack Holders

Issuing companies.

Investors.

Employees.

Regulators.

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THANK YOU