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  • Category: Stock Market

    What is the difference between ADR and GDR

    Puzzled about the concepts of ADR and GDR? Get a better understanding of the meaning of these concepts and its effects on the stock market & the economy as a whole.

    What is the meaning of ADR and GDR and what is the main difference between these? Is it only related to stock market or it is affecting our economy also? Does ADR and GDR have any effect on the common man? Or it affects only the traders of equity market? What are the criteria to become ADR and GDR?
  • Answers

    4 Answers found.
  • ADR stands for American Depositary Receipt and GDR stands for Global Depositary Receipt. ADRs are generally listed on American stock exchanges and GDRs are listed on European stock exchanges. It is only through ADRs and GDRs the shares of a foreign company, which is listed in its own country, can be traded in US and European countries respectively. The Indian equivalent of the Depositary Receipts is IDR (Indian Depositary Receipt). If a foreign company wants to list in Indian stock exchanges like NSE or BSE, it has to issue IDRs. The value of an IDR can be multiples or sub-multiples of the value of the share in its original country. The IDR will be in rupees converted from the equivalent currency of the country, where the stock is originally listed. Standard Chartered plc was the first foreign company to issue IDRs in India.

    In order to issue IDRs, the foreign company should meet some additional requirements in addition to the requirements needed by a domestic company intending to make an IPO in India. ADRs, GDRs, IDRs, etc. are used by foreign companies to raise capital in the world market. With these instruments, domestic investors can hold the shares of global markets.
    Since these are like common stocks, it will have the same effect as common stocks. The stake holders of these instruments can receive dividends and can have voting rights also.

  • ADR- American depository receipt.
    This is one type of investment made for US investor in those companies which neither traded in US stock exchange nor the company is from USA.
    But USA investors can hold the shares of such companies as the ADR certificate issued by US depository banks and it is being trade on USA dollar price. Companies which have more weight age get approved by US depository banks to trade with dollar demonitaon.
    Those are some of Indian companies which are available in ADR.
    Tata motor, wipro, ICICI bank,infosys, HDFC bank,Dr Reddy lab etc.

    GDR- Global depository receipt.
    Some companies want to raise funds more than there based country, or beyond the stock exchange they are listed. GDR is issued in the local currency where they are being traded.
    For example- GDR price in UK is in pound, in japan it is yen

    Yes it has a huge effect on pricing of local market also.
    Suppose we found that ADR of Tata motor price has increased it clearly indicates that foreign investors holding more stocks in Tata motor so obviously their will price hike in Indian equity market also.

    Earn in USD with out Investment

  • There are various difference between ADR and GDR as given below
    ADR stands for American Depository Receipts whereas GDR stand for Global Depository Receipts. GDR is compulsory to foreign company to access share market for dealing of in any other countries but (ADR) is also compulsory but only for non stock market of USA in us companies.

    Phagu Mahato
    Success occurs when opportunity and preparation meet.

  • ADR as has been pointed out stands for American depository receipts. Foreign companies can list on US exchanges like the New York Stock exchange and Nasdaq through this process. GDR Stands for Global depository receipt. This is a way foreign companies can list on European exchanges like the London Stock Exchange.

    ADR's are more difficult to get clearance than GDR's as the disclosure requirement is much higher in the US than in Europe. ADR's are subject to US GAAP accounting rules while filing their financial statements. GDR's are subject to accounting standards in the UK or other European countries.

    The ADR process is much more expensive than the GDR process. Retail investors can buy ADR shares while only Qualified institutional buyers (QIB's) are allowed to purchase GDR's. Given the tougher regulatory environment in the US the legal liabilities are more for ADR issuers when compared to GDR issuers.

    Some prominent ADR issuers are Infosys, Cognizant, Wipro, HDFC and ICICI bank. Bajaj Auto, Amtek and Aditya Birla Nuvo have issued GDR's.

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