Question

Explain issuing process of GDRs?

Answer 1

Global Depository Receipts (GDR)/American Deposit Receipts (ADR)/ForeignCurrency Convertible Bonds (FCCB): Foreign Investment through GDRs/ADRs, ForeignCurrency Convertible Bonds (FCCBs) is treated as Foreign Direct Investment. Indian companiesare allowed to raise equity capital in the international market through the issue ofGDR/ADRs/FCCBs. These are not subject to any ceilings on investment. An applicant companyseeking Government’s approval in this regard should have a consistent track record for goodperformance (financial or otherwise) for a minimum period of 3 years. This condition can berelaxed for infrastructure projects such as power generation, telecommunication, petroleumexploration and refining, ports, airports and roads.

Answer 2

The procedure of issuing GDRs by an Indian company involves issuing of its equity shares (in Rupees) to the depository bank situated in a foreign country and then the issue of GDRs by the depository bank against the said equity shares to the foreign investors in foreign currency.

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