discuss the procedure of issuing global depository receipts
Answers
Explanation:
DEPOSITARY RECEIPTS
Depositary receipts (DRs) are negotiable financial instruments that are traded on domestic stock exchange. The individuals holding depository receipt are considered to have an ownership interest in the shares of the company like ordinary shareholders. The difference is that these are the receipts which are traded outside the home country of the company to increase the visibility of the company in the global world and to expand the capital investment in other countries.
The holders of GDRs are entitled to all the rights of a shareholder with respect to dividend and capital gains and can be purchased and sold like other securities. This enables the investors in any country to purchase the securities of any other country without any currency or language barriers.
GLOBAL DEPOSITORY RECEIPTS
Global Depository Receipts or GDRs are certificates that are nowadays becoming popular among the investors to access the global stock market. The companies have also accepted it as one of the ways to list its securities in foreign markets. The concept of GDRs is based on American Depository Receipts (ADRs) which were the first depository receipts issued in 1927. It allowed the companies outside the USA to have access to capital markets of the USA.
A global depositary receipt (GDR) is similar to an ADR, but is a depositary receipt sold outside the United States and outside the home country of the issuing company. These are widely used nowadays by almost all the companies in the world to gain accessibility to the capital markets of the world. India is no exception. Many companies in India have expanded their market to foreign platforms with the help of GDRs and gained access to investment capital overseas.
PROCEDURE INVOLVED
A GDR is issued in the same manner as a financial instrument. It is administered by a depository bank to the corporate issuer. The bank is generally located in the countries in which the GDR is traded. A GDR is often considered as a Deposit Agreement between the bank issuing it and the holder of GDR. The agreement specifies the rights and duties of each party. There is a separate Custodian bank which holds the shares of the company that underlie the GDR. The depository bank then buys the shares and deposits the shares in the custodian bank. These shares are then issued in the form of GDRs representing ownership in these shares
Explanation:
the procedure of issuing of GDRs by an Indian company involves issuing of its equality shares to the depository bank situated in a foreign country and then the issue of GDRs by the depositry bank against the said equality shares to the foregin investors in foregin country