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1. Presented by :
Vijay Mehta

2. AMERICAN DEPOSITORY RECEIPTS

3.  Type of negotiable (transferable) financial security.
 Traded on a local stock exchange.
 Physical certificate allowing investors to hold shares
in equity of other countries.

4.  For the Company
1. Raise capital from foreign markets.
2. Increases the share liquidity.
 For the Investor
1. Investors gain the benefits of diversification.
2. Investors will be able to reap the benefits of foreign
(emerging) markets.

5. Investment
brokers
banker
depositary Issuer lawyers
Custodian Accountants

6.  The first ADR was introduced by J.P. Morgan in
1927 for the British retailer Selfridges.
 Shares of many non-US companies trade on US
stock exchanges.
 ADRs are denominated and pay dividends in US
dollars and may be traded like regular shares of
stock.

8.  Sponsored ADR program
BROK US
INVE E/ EXCH
STOR DEAL ANG
ER E

9. • Under the sponsored program there are 3 levels
and they are ;
• Level 1- Level 1 depositary receipts are the lowest
level of sponsored ADRs that can be issued. When
a company issues sponsored ADRs, it has one
designated depositary who also acts as its transfer
agent.
• Level 1 shares can only be traded on the OTC
market and the company has minimal reporting
requirements with the U.S. Securities and
Exchange Commission [SEC]

10. • Level 2 depositary receipt programs are more
complicated for a foreign company. When a
foreign company wants to set up a Level 2
program, it must file a registration statement with
the U.S. SEC and is under SEC regulation.
• The advantage that the company has by upgrading
their program to Level 2 is that the shares can be
listed on a U.S. stock exchange. These exchanges
include the New York Stock Exchange (NYSE),
NASDAQ, and the American Stock Exchange
(AMEX).

11. • A Level 3 American Depositary Receipt program is
the highest level a foreign company can sponsor.
Because of this distinction, the company is
required to adhere to stricter rules that are similar
to those followed by U.S. companies.
• Foreign companies with Level 3 programs will
often issue materials that are more informative and
are more accommodating to their U.S.
shareholders because they rely on them for capital

12.  Unsponsored Programme:
• Unsponsored shares trade on the over-the-
counter (OTC) market
• Unsponsored ADRs are often issued by more
than one depositary bank

13.  Restricted Programme
 Foreign companies that want their stock to be
limited to being traded by only certain
individuals may set up a restricted program
 ADR programs operating under one of these 2
rules make up approximately 30% of all issued
ADRs

14.  Privately placed (SEC Rule 144A) ADRs
 ADR program under SEC Rule 144A
 private placement
 restricted stock and may only be issued to or
traded by Qualified Institutional Buyers (QIBs)

15.  Offshore (SEC Regulation S) ADRs
 SEC Regulation S
 Shares are not, and will not be registered with
any United States securities regulation authority
 The shares are registered and issued to offshore,
non-US residents

17.  Certificate issued by a depository bank, which
purchases shares of foreign companies.
 Several international banks issue GDRs, such as
JPMorgan Chase, Citigroup, Deutsche Bank, Bank
of New York.
 GDRs are often listed in the Frankfurt Stock
Exchange, Luxembourg Stock Exchange and in the
London Stock Exchange.

18. Co/- deposits
Co/- deposits The bank then
The bank then
large no of shares
large no of shares Is receipts are
Is receipts are
issues receipts
issues receipts
located in
located in sold to people of
sold to people of
underlying the
underlying the
country where it
country where it that country
that country
shares (2-4)
shares (2-4)
wants to list.
wants to list.
Behaves exactly
Behaves exactly
like regular
like regular This receipt is
This receipt is
stocks- price
stocks- price then listed on
then listed on
fluctuation
fluctuation local stock
local stock
according to
according to exchanges.
exchanges.
demand &
demand &
supply
supply

19.  London Stock Exchange
 Luxembourg Stock Exchange
 Dubai International Financial Exchange (DIFX)
 Singapore Stock Exchange
 Hong Kong Stock Exchange

20. Company ADR GDR
Bajaj Auto No Yes
Dr. Reddys Yes Yes
HDFC Bank Yes Yes
Hindalco No Yes
ICICI Bank Yes Yes
Infosys Technologies Yes Yes
ITC No Yes
L&T No Yes
MTNL Yes Yes
Patni Computers Yes No
Ranbaxy Laboratories No Yes
Tata Motors Yes No
State Bank of India No Yes
VSNL Yes Yes
WIPRO Yes Yes

21. FDI
Foreign Direct Investment

22.  FDI means investment by non-resident entity/person resident
outside India in the capital of an Indian company
 They are made by a company or entity based in one country, into
a company or entity based in another country.

23.  Companies invest in foreign countries:
 To gain control over the market
 To increase its sales
 To reduce its costs
 To acquire technological and managerial know-how
 To establish control of managerial decision making
via investment in equity share capital

24.  Purchase of existing assets in a foreign country.
 New investment in property, plant, equipment.
 Participation in a joint venture with a local partner.
 Transfer of many types of assets like human resources,
systems, technical know-how in exchange for equity in
foreign companies.
 Through trading in equity.

25.  Domestic capital is generally inadequate for the
purpose of economic growth
 FDI brings with it human and technological expertise
 Increases a firms global competitiveness
 Profitable both for the country receiving the
investment and the investor

26.  SUPPLY Factors:
 Production Costs
 Logistics
 Availability of Natural Resources
 Availability of Human Resources at low cost
 Access to key technology

27.  DEMAND Factors:
 Customer Access
 Marketing Mobility
 Exploitation of Competitive Advantages
 POLITICAL Factors:
 Avoidance of Trade Barriers
 Economic Development Incentives

28.  No need of
Government Approval  Requires prior
Approval of the
 Only regional RBI Government
office has to be
informed Proposals either to FIPB
or DIPP
Investment upto the
prescribed sectoral limit Investment upto the
prescribed sectoral limit

29.  Prohibited Sectors
 Lottery Business
 Gambling and Betting including Casinos
 Chit Funds
 Manufacturing of Cigars, cigarettes, tobacco or
tobacco substitutes
 Activities / sectors not open to private sector
investment e.g. Atomic Energy and Railway
Transport

30. Permitted Sectors
Sector % of FDI Cap Entry Route
Pharmaceuticals 100% Government
NBFC 100% Automatic
Insurance 26% Automatic
Banking – Public Sector 20% Government
Banking – Private Sector 74% Automatic upto 49%
Government beyond
49-74%
E-Commerce Activities 100% Automatic
Telecom Services 74% Automatic upto 49%
Government beyond
49-74%
Construction Development 100% Automatic

34.  Integration into global economy
 Economic growth
 Trade
 Technology diffusion and knowledge transfer
 Increased competition
 Human Resources Development
 Employment