Depository receipts
Also called: ADR, GDR, IDR · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
Depository receipts are certificates issued by a depository bank in one country that stand for shares of a company from another country. They let the company's shares be traded on a foreign exchange. Investors there can own a foreign company without dealing in a foreign market or currency.
- ADR (American Depository Receipt): lets an Indian firm trade in the US.
- GDR (Global Depository Receipt): lets an Indian firm trade in other foreign markets.
- IDR (Indian Depository Receipt): lets a foreign firm trade in India.
Example
Standard Chartered issued the only IDR in India, in 2010. The Depository Receipts Scheme 2014 made the rules for ADRs and GDRs more liberal.
Don't confuse with
- Direct overseas listing: here the company's own shares are listed abroad, with no depository receipts in between. It was enabled in India in 2024.
Related concepts
- Primary market
- Initial Public Offering
- Red herring prospectus
- Book building
- Anchor investor
- Qualified Institutional Buyer
- Application Supported by Blocked Amount
- Green shoe option
- Underwriting
- Grey market premium