International Depository Receipts - ADR, GDR, IDR
Questions about American Depository Receipts (ADRs), Global Depository Receipts (GDRs), and Indian Depository Receipts (IDRs) including their features, advantages, disadvantages, and regulatory requirements.
Questions
What is/are the eligibility criteria of foreign issuing company to issue Indian Depository Receipts (IDRs)?
- Preissue paidup capital and free reserves of at least US$ 50 million
- A continuous trading record or history on a stock exchange
- Listed in home country and not been prohibited to issue securities
- All of the above
American depository receipt fee varies from one cent to ___ cents per share depending upon the ADR amount and its timing.
- Four
- Three
- Five
- Ten
GDRs are usually denominated in U.S. dollars.
- True
- False
What are the requirements for investing in IDRs?
- IDRs can be purchased by any person who is resident in India as defined under FEMA.
- Minimum application amount in an IDR issue shall be Rs. 20,000.
- Investments by Indian companies in IDRs shall not exceed the investment limits.
- All of the above
Issue of Global Depository Receipt is one of the most popular ways to tap the global equity markets.
- True
- False
Feature(s) of Global Depository Receipts is/are _______.
- GDRs are issued to investors in more than one country.
- GDRs are issued to investors by the depository bank.
- GDR holders are entitled to all corporate benefits available to equity holders.
- All of the above
Identify the advantage(s) of GDRs.
- GDR provides access to foreign capital markets.
- GDR can be freely transferred.
- GDR saves the taxes of an investor.
- All of the above
____ is a foreign currency denominated derivative instrument in the form of depository receipt created outside India and issued to non-resident investors.
- IDR
- SDR
- GDR
- ADR
Which are the intermediaries involved in issuance of IDRs?
- Overseas Custodian Bank
- Domestic Depository
- Merchant Banker registered with SEBI
- All of the above
American Depository Receipt (ADR) is a certified negotiable instrument issued by an American bank suggesting the number of shares of a foreign company that can be traded in U.S. financial markets.
- True
- False
The regulatory body ________ introduced the concept of ADR.
- Securities Exchange Commission (SEC)
- SEBI
- RBI
- Imperial Bank
_____ is/are the disadvantage(s) of Global Depository Receipts.
- Dividends are paid in domestic countrys currency which is subject to volatility in the forex market.
- It is mostly beneficial to High Net-Worth Individual (HNI) investors.
- GDR is one of the expensive sources of finance.
- All of the above
Which is the next step of GDR mechanism, after the overseas depository bank enter into a custodian agreement with the domestic custodian of such company?
- On the instruction of domestic custodian, the overseas depository bank issues shares to foreign investors.
- The domestic custodian holds the equity shares of the company.
- The domestic company enters into an agreement with the overseas depository bank for the purpose of issue of GDR.
- The whole process is carried out under strict guidelines.
Depository bank has right to issue one GDR certificate for _______ shares.
- 2 to 10
- 3 to 5
- 4 to 8
- 5 to 10
GDRs can not be directly issued to foreign investors.
- True
- False