Global Depository Receipts
This query is : Resolved
05 October 2009
I have studied the definition of GDR from module but could not understand it nicely.
Please explain its meaning nicely.
Please explain its meaning nicely.
05 October 2009
Hi,
The terms commonly used in respect of Issues:
1. Depository Receipts
Depository Receipts are basically negotiable instruments denominated in U.S. dollars, representing a non-U.S. company’s publicly traded local currency equity shares (“Depository Receiptsâ€). They are created when the local currency shares of an Indian company are delivered to the Overseas Depository Bank’s (ODB’s), domestic custodian bank, against which, the Depository issues Depository Receipts in U.S. dollars. Each Depository Receipt may represent one or more underlying shares. Through these issues, market companies in India have been able to tap the global equity market to raise foreign currency funds by way of equity. The Depository Receipts may be traded freely on an exchange or an over- the- counter market.
Depository Receipts can be either “GDRs†which are usually listed on a European stock exchange, or American Depository Receipts (“ADRsâ€), which are usually listed on the US stock exchange.
2. Issuer
It is the company that plans to tap the foreign market through the global issue mechanism.
3. Lead Manager
The lead manager is the person responsible for marketing the issue (the “Lead Managerâ€). The Lead Manager advises the Issuer on the issue and the rate of interest, price of the security, etc. The Lead Manager decides also on the nature of investment i.e. GDR/ADR, coupon rate on bonds, conversion price, etc.
4. Co- Managers/ Underwriters
They assist the Lead Manager in fulfilling his obligations to the Issuer (the “Co- Managers/ Underwritersâ€)
5. Depository –
It is the bank authorized by the Issuer to issue GDRs/ADRs against issue of ordinary shares of the Issuer (the “Depositoryâ€). It is the overseas agent of the Issuer who issues the GDR/ADR to the investors in lieu of shares allotted to him/her. The physical possession of the shares rests with the Custodian (as defined below) although the ownership of the shares vests with the investors. The Depository is the registered owner of the shares and its name appears in the Register of Members of the Issuer.
6. Custodian -
It is the banking company (situated in India), which acts as a custodian for the ordinary shares of an Indian Company, issued by it against GDRs/ADRs or certificates (the “Custodianâ€). The Issuer appoints the Custodian. The Custodian acts in co- ordination with the Depository. The physical possession of the shares is given to the Custodian.
7. Legal Advisors-
They assist the Issuer, Lead Manager, Co- Managers and the Underwriters in the preparation of the prospectus, depository agreement, indemnity agreement and subscription agreement (the “Legal Advisorsâ€). The Legal Advisors enable the Issuer to comply with proper disclosures relating to the issue.
8. Auditors-
The Issuer must appoint auditors who will prepare the auditor’s report for inclusion in the prospectus, provide requisite consent and comfort letters and reconcile the Issuer’s accounts with US GAAP
9. ADRs-
What is an ADR?
An ADR means any instrument in the form of a Depository Receipt or Certificate (by whatever name it is called). The term ADR means a security issued by a bank or a Depository in US against the underlying Rupee shares of a company incorporated in India, created by a Depository outside India in US and issued to non- resident investors against the issue of ordinary shares of the Issuer.
In other words, it represents the ownership in the shares of a foreign company trading on US financial markets. The stock of many non-US companies trades on US exchanges through the use of ADRs. ADRs enable US investors to buy shares in foreign companies without undertaking cross-border transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.
Regards
The terms commonly used in respect of Issues:
1. Depository Receipts
Depository Receipts are basically negotiable instruments denominated in U.S. dollars, representing a non-U.S. company’s publicly traded local currency equity shares (“Depository Receiptsâ€). They are created when the local currency shares of an Indian company are delivered to the Overseas Depository Bank’s (ODB’s), domestic custodian bank, against which, the Depository issues Depository Receipts in U.S. dollars. Each Depository Receipt may represent one or more underlying shares. Through these issues, market companies in India have been able to tap the global equity market to raise foreign currency funds by way of equity. The Depository Receipts may be traded freely on an exchange or an over- the- counter market.
Depository Receipts can be either “GDRs†which are usually listed on a European stock exchange, or American Depository Receipts (“ADRsâ€), which are usually listed on the US stock exchange.
2. Issuer
It is the company that plans to tap the foreign market through the global issue mechanism.
3. Lead Manager
The lead manager is the person responsible for marketing the issue (the “Lead Managerâ€). The Lead Manager advises the Issuer on the issue and the rate of interest, price of the security, etc. The Lead Manager decides also on the nature of investment i.e. GDR/ADR, coupon rate on bonds, conversion price, etc.
4. Co- Managers/ Underwriters
They assist the Lead Manager in fulfilling his obligations to the Issuer (the “Co- Managers/ Underwritersâ€)
5. Depository –
It is the bank authorized by the Issuer to issue GDRs/ADRs against issue of ordinary shares of the Issuer (the “Depositoryâ€). It is the overseas agent of the Issuer who issues the GDR/ADR to the investors in lieu of shares allotted to him/her. The physical possession of the shares rests with the Custodian (as defined below) although the ownership of the shares vests with the investors. The Depository is the registered owner of the shares and its name appears in the Register of Members of the Issuer.
6. Custodian -
It is the banking company (situated in India), which acts as a custodian for the ordinary shares of an Indian Company, issued by it against GDRs/ADRs or certificates (the “Custodianâ€). The Issuer appoints the Custodian. The Custodian acts in co- ordination with the Depository. The physical possession of the shares is given to the Custodian.
7. Legal Advisors-
They assist the Issuer, Lead Manager, Co- Managers and the Underwriters in the preparation of the prospectus, depository agreement, indemnity agreement and subscription agreement (the “Legal Advisorsâ€). The Legal Advisors enable the Issuer to comply with proper disclosures relating to the issue.
8. Auditors-
The Issuer must appoint auditors who will prepare the auditor’s report for inclusion in the prospectus, provide requisite consent and comfort letters and reconcile the Issuer’s accounts with US GAAP
9. ADRs-
What is an ADR?
An ADR means any instrument in the form of a Depository Receipt or Certificate (by whatever name it is called). The term ADR means a security issued by a bank or a Depository in US against the underlying Rupee shares of a company incorporated in India, created by a Depository outside India in US and issued to non- resident investors against the issue of ordinary shares of the Issuer.
In other words, it represents the ownership in the shares of a foreign company trading on US financial markets. The stock of many non-US companies trades on US exchanges through the use of ADRs. ADRs enable US investors to buy shares in foreign companies without undertaking cross-border transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.
Regards
11 November 2009
Hi
Can u please give clarity on ADR EPS is prepared under US GAAP or can we prepare in other GAAP alo.I think as per listing agreement preparing statements under US GAAP is must.
Can u please give clarity on ADR EPS is prepared under US GAAP or can we prepare in other GAAP alo.I think as per listing agreement preparing statements under US GAAP is must.
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