DR or Depository Receipt

DR or Depository Receipt A depository receipt is a tradeable instrument, equivalent to a fixed number of shares, which is floated on overseas markets. Depending on which market it is floated on, it can be ADR or American Depository Receipt, or GDR, i.e. Global Depository Receipt. A means of raising funds in the overseas market, several Indian companies have tried this route. A depository house is given information on the company to provide it to foreign institutional investors, brokers, equity analysts, and other investors. The order is placed through an investment banker overseas, who contacts a broker in India , The local broker picks up the shrews for the depository house, which then issues DRs against these shares at a particular ratio. The DRs are traded on the OTC counters abroad.

Depending on the scope of the offer, there are four levels of ADRs. Level I is for OTC trading and the company offering the DR does not have to meet the stringent listing requirements (chiefly US accounting standards) of Wall Street. For Level II, listing is mandatory, as is meeting its financial and listing criteria. Level III is for companies already listed on the US exchanges, while Level IV is similar to Level III, except that the DRs are offered only to qualified institutional investors. This last level is also called Restricted Area DR programme, and the DRs, in this instant, are called GDRs.

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