Global Depository Receipts

Topics: Stock market, Stock exchange, Stock Pages: 9 (2797 words) Published: March 18, 2013
Global Depository Receipt (GDR) is a sort of bank certificate that is issued in more than one country for shares in foreign companies. It can be circulated worldwide in the capital markets. GDR's are issued by banks. Th bank purchases shares of foreign companies and deposit it on the accounts. Thus facilitation of the trade of share is the main objective of GDR, especially those from emerging markets. The values of the related share and the prices of GDR's are often close.

Indian companies can raise equity capital in the international market by issuing the Global Depository Receipt (GDRs). GDRs are designated in dollars and there are no ceilings on investment. The requirement for issuing of GDR is that the company applying should have consistent track record for good performance (financial or otherwise) for a minimum period of 3 years. For infrastructure projects such as power generation, telecommunication, petroleum exploration and refining, ports, airports and roads this condition would be however relaxed. Use of GDRsGDR has many advantages. The government may use the proceed of the GDR to finance capital goods imports, capital expenditure including domestic purchase/installation of plant, equipment and building and investment in software development, prepayment or scheduled repayment of earlier external borrowings, and equity investment in JV/WOSs in India. GLOBAL DEPOSITORY RECEIPTS -------------------------------------------------

A negotiable certificate held in the bank of one country representing a specific number of sharesof a stock traded on an exchange of another countryTo raise money in more than one market, some corporations use global depositary receipts(GDRs) to sell their stock on markets in countries other than the one where they have their headquarters.The GDRs are issued in the currency of the country where the stock is trading. For example, aMexican company might offer GDRs priced in pounds in London and in yen in Tokyo.Individual investors in the countries where the GDRs are issued buy them to diversify intointernational markets. GDRs let you do this without having to deal with currency conversion andother complications of overseas investing. The objective of a GDR is to enable investors indeveloped markets, who would not necessarily feel happy buying emerging market securitiesdirectly in the securities’ home market, to gain economic exposure to the intended company and,indeed, the overall emerging economy using the procedures with which they are familiar.Global Depository Receipt (GDR) - certificate issued by international bank, which can be subjectof worldwide circulation on capital markets. GDR's are emitted by banks, which purchase sharesof foreign companies and deposit it on the accounts. Global Depository Receipt facilitates tradeof shares, especially those from emerging markets. Prices of GDR's are often close to values of related shares.GDRs are securities available in one or more markets outside the company’s home country. The basic advantage of the GDRs, compared to the ADRs, is that they allow the issuer to raise capitalon two or more markets simultaneously, which increases his shareholder base. They gained popularity also due to the flexibility of their structure.GDRs are typically denominated in USD, but can also be denominated in Euros. GDRs arecommonly listed on European stock exchanges, such as the London Stock Exchange (LSE) or Luxembourg Stock Exchange, or quoted on SEAQ (Stock Exchange Automated Quotations)International, and traded at two other places besides the place of listing, e.g. on the OTC marketin London and on the private placement market in the US. Large part of the GDR programsconsists of a US tranche, which is privately placed and a non-US tranche that is sold to investorsoutside the United States, typically in the Euro markets.An overwhelming majority of DR programs by companies from Central and Eastern Europeancountries are established as GDRs, typically listed in...
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