Global Depository Receipts (GDR) - Introduction and Definition

# Global Depository Receipts (GDR)

## 1. What is a GDR?

A Global Depository Receipt (GDR) is a certificate issued by a depository bank that:

• Purchases shares of foreign companies, AND
• Creates a security on a local exchange backed by those shares.

### Simple Analogy

```

Indian Company (Issues shares) → Foreign Depository Bank (Holds shares)

↓

Issues GDRs to Foreign Investors

↓

Traded on Foreign Stock Exchanges

(e.g., London, Luxembourg)

```

## 2. Statutory Definition — Section 2(44)

A Global Depository Receipt is defined under Section 2(44) of the Companies Act, 2013.

## 3. Purpose and Significance

GDRs allow Indian companies to:

• Access foreign capital markets without listing directly on those exchanges.
• Raise funds in foreign currency from international investors.
• Enhance global visibility of the company.

## 4. Mechanism — Step by Step

1. Indian company issues underlying shares to a foreign depository bank (e.g., in USA, Europe).

2. The depository bank holds these shares as custodian.

3. The bank issues GDRs (certificates) representing those shares.

4. Foreign investors buy and trade these GDRs on foreign stock exchanges.

5. Each GDR represents a specified number of underlying equity shares.

## 5. Key Features at a Glance

(This is an introductory note — issuance procedure, voting rights, and conversion mechanics typically follow in detailed study.)