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Finanacial management

Shyam Kanabar (Article) (160 Points)

07 January 2012

What is the difference between Golbal depository ltd. and Bridge Finance.pl.Explain in the Briefly manner.if Possible given me Example.

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* Krishna * (CA Student) (6149 Points)
Replied 07 January 2012

Bridge Finance is a loan taken by businesses usually from commercial banks for short period, when term loan sanctioning was pending from the financial institutions. Means if a company had applied for term loan from a financial institution, usually they takes time for evaluating the application and to release the loan amount to the company. In this delay period, companies usually takes short term loan from banks and usually repays back the amount to banks once they receive term loan from financial institutions. In general, interest rate on bridge finance is higher when compared to term loans rate.

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* Krishna * (CA Student) (6149 Points)
Replied 07 January 2012

Global Depository Receipts is a negotiable instrument denominated in US Dollars which represents a non-US company's publicly traded local currency equiry shares. GDRs are created when local currency shares of an Indian co. are delivered to depository's local custodian bank, against which such depository bank issues depository receipts in US Dollars. By issuing GDRs indian companies can tap global equity funds for companies various expansion plans/other uses.

Sanket (!..Live to Give..!) (16427 Points)
Replied 07 January 2012

Global Depository Receipts (GDRs): It is a negotiable certificate denominated in US dollars which represents a Non-US company’s publically traded local currency equity shares. GDRs are created when the local currency shares of an Indian company are delivered to Depository’s local custodian Bank against which the Depository bank issues depository receipts in US dollars. The GDRs may be traded freely in the overseas market like any other dollar-expressed security either on a foreign stock exchange or in the over-the-counter market or among qualified institutional buyers.

By issue of GDRs Indian companies are able to tap global equity market to raise foreign currency funds by way of equity. It has distinct advantage over debt as there is no repayment of the principal and service costs are lower.

Bridge Finance: Bridge finance refers, normally, to loans taken by the business, usually from commercial banks for a short period, pending disbursement of term loans by financial institutions, normally it takes time for the financial institution to finalise procedures of creation of security, tie-up participation with other institutions etc. even though a positive appraisal of the project has been made. However, once the loans are approved in principle, firms in order not to lose further time in starting their projects arrange for bridge finance. Such temporary loan is normally repaid out of the proceeds of the principal term loans. It is secured by hypothecation of moveable assets, personal guarantees and demand promissory notes. Generally rate of interest on bridge finance is higher as compared with that on term loans.