Types

Depending on the location in which these receipts are issued they are called as

♤ ADRs or American Depository Receipts (if they are issued in USA)

♤ IDR or Indian Depository Receipts (if they are issued in India) or

♤ GDR or Global Depository Receipt, in general.

14.1. American Depository Receipt (ADR)

♤ It is a certified negotiable instrument representing the shares of a foreign company issued by an American bank that can be traded in U.S. financial markets. It provide US based investors with an opportunity to trade in shares of a foreign company.

♤ These are further classified based on the detailed rules under the US securities laws. The classification is based on applicable disclosure norms and consists of:

o Level 1: These programs establish a trading presence in the US but cannot be used for capital raising. They may only be traded on OTC markets, and can be unsponsored.

o Level 2: These programs establish a trading presence on a national securities exchange in the US but cannot be used for capital raising.

o Level 3: These programs can not only establish a trading presence on a national securities exchange in the US but also help raise capital for the foreign issuer.

14.2. Global Depository receipts (GDRs)

♤ As per the Companies Act, 2013 GDRs means any instrument in the form of a depository receipt created by a foreign depository outside India and authorised by a company making an issue of such depository receipts.

♤ GDR is a collective term for DRs issued in non-US jurisdictions and includes the DRs traded in London, Luxembourg, Hong Kong, Singapore.