What are IDR ADR and GDR?

Indian Depository Receipts

American Depository Receipts

Global Depository Receipts

ADR: American Depository Receipts

GDR: Global Depository Receipts

IDR: Indian Depository Receipts

Say if an Indian company wants to mobilize capital from abroad, can it do it? Even a novice will instantaneously come up with an answer like ‘NO’. We have too many controls which will not allow raising of capital abroad easily. This is what we ‘perceive.’ As we are liberalizing our economy, raising of capital from outside the country is slowly enabled by the government. ADRs and GDRs are the result of such liberalization.

What happens in these ADRs and GDRs is that an Indian corporate can deposit its stock (shares) with a foreign depository (foreign host country equivalents to our own NSDL and CSDL) and raise  money from foreign public by offering these ADR/GDR issues for subscripttion. Usually the corporate conducts a road-show (advertising and publicity for its issue) and attracts the attention/interest of the foreign public to subscribe to its capital. The foreign governments and / or stock exchanges (where the issue will be listed) will have their own regulations (which are usually very stringent) which have to be complied with by the Indian corporate. The government liberalized the rules in this regard sometime in 2002.

And IDR is an exact reverse of the ADR/GDR issue. A foreign company can raise capital from Indian public, the same way that Indian companies can raise capital through ADR/GDR issues. The government of India framed the IDR rules sometime in 2004.

The basic role they play in the economy now should be very clear to you? Is it? Raising capital from foreigners or allowing foreign companies to raise capital in India.

Source:Discover it blogspot