PPT
PPT
PPT
DEPOSITORY RECIEPTS
Depository receipts (DRs) are certificates that represent an ownership interest in the ordinary shares of stock of a company, but that are marketed outside of the companys home country to increase its visibility in the world market and to access a greater amount of investment capital in other countries. American depositary receipts (ADRs) were the 1st depositary receipts issuedJP Morgan issued the 1st ADR in 1927. ADRs allowed companies domiciled outside of the United States to tap the United States capital markets.
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. The 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.
Indian companies can raise equity capital in the international market by issuing the Global Depository Receipt The requirement for issuing of GDR is that the company applying should have consistent track record for good performance . For infrastructure projects such as power generation, telecommunication, petroleum exploration and refining, ports, airports and roads this condition would be however relaxed.
The custodian bank is located in the home country of the issuer and holds the underlying corporate shares of the GDR for safekeeping. The custodian bank is generally selected by the depositary bank rather than the issuer, and collects and remits dividends and forwards notices received from the issuer to the depositary bank, which then sends them to the GDR holders. The custodian bank also increases or decreases the number of company shares held per instructions from the depositary bank. The voting provisions in most deposit agreements stipulate that the depositary bank will vote the shares of a GDR holder according to his instructions; otherwise, without instructions, the depositary bank will not vote the shares
GDRs do, however, have foreign exchange risk if the currency of the issuer is different from the currency of the GDR, which is usually USD. The main benefit to GDR issuance to the company is increased visibility in the target markets, which usually garners increased research coverage in the new markets; a larger and more diverse shareholder base; and the ability to raise more capital in international markets GDRs also overcome limits on restrictions on foreign ownership or the movement of capital that may be imposed by the country of the corporate issuer, avoids risky settlement procedures, and eliminates local or transfer taxes that would otherwise be due if the companys shares were bought or sold directly. There are also no foreign custody fees, which can range from 10 to 35 basis points per year for foreign stock bought directly
GDR MARKET
Depositary receipts can be created /canceled depending on supply and demand When shares are created ,more corporate stock of the issuer is purchased and placed in custodian bank in the a/c of depositary bank When shares are canceled the investor turns in the shares to the depositary bank , then cancels the GDR & instruct the custodian bank to transfer the shares to the GDR investors
Price of GDR primarly depends on its DR ratio DR RATIO =no. of GDR/underlying shares 1 GDR may represent an ownership interest in many shares of corporate stock or fractional shares Most GDR are priced so that they are competitive with shares of like company trading on the same exchange as the GDRs Typically, GDR price range from $7-$20
If the GDR price moves too far from the optimum range, more GDRs will be either created or canceled to bring the GDR price back within the optimum range determined by the depositary bank Most of the factors governing GDR prices are the same that affects stocks currently the stock exchange trading GDRs are London stock exchange Luxembourg stock exchange NASDAQ Dubai Singapore stock exchange Hong kong
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PRESENTED BY: RITU SRIVASTAVA SWATI NEGI SWATI DALAL SWATI SABHARWAL VANITA