GDR is an instrument issued abroad by a
company to raise funds in some foreign currencies and is listed and traded on a
foreign stock exchange.
Process of Issuing GDRs
There are four steps in the process of
issuing GDRs as follows.
The company issuing GDRs hands over its
shares to one Domestic Custodian Bank (DCB).
The DCB requests the Overseas Depository
Bank (ODB) situated in the foreign country for issuing the shares as GDR.
The ODB converts the shares shown in
rupees into GDR which are denominated in US dollars.
Finally, ODB issues them to the
It is a negotiable instrument and can be
traded freely like any other security.
Indian companies with sound financial
track of three years are readily allowed to access international financial
markets through GDR. However clearances are required from the Foreign
Investment Promotion Board (FIPB) and the Ministry of Finance.
GDRs are issued to investors
across the country. It is denominated in any acceptable freely
GDR is denominated in any foreign
currency but the underlying shares would be denominated in local currency of
The holder is entitled to dividend and
bonus on the value of shares underlying the GDR.
The investor can convert GDR into equity
shares, and sell the shares mentioned in the GDR through a local custodian.
This provision can be used after 45 days from the date of issue.
Under GDR, the issuing company transacts
with only one entity for all its transactions.