What do you mean by ADRS and GDRS ? Explain the process of issuance of GDRS. Also discuss the rules governing ADR/ GDRS.
Or Define Global Depository Receipts. Discuss its various benefits and limitations.
Ans. Meaning of GDRS: A depository receipt is basically negotiable certificate denominated in US dollars that represents a non-US company's publicly-traded local currency (Indian rupee) equity shares. In theory, though a depository receipt can also represent a debt instrument, in practice it rarely does. DRs (Depository Receipts) are created when the local currency shares of an Indian company are delivered to the depository's local custodian bank, against which the Depository bank (such as the Bank of New York) issues depository receipts in US dollars. These depository receipts may trade freely in the overseas markets like any other dollar-denominated security, either on a foreign stock exchange, or in the over-the-counter market, or among a restricted group such as Qualified Institutional Buyers (QIBS).
Indian issues have taken the form of GDRS to reflect the fact that they are marketed globally, rather than in a specific country or market.
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