Global Depository Receipt (GDR) is a negotiable certificate issued by the international bank to a company against a certain number of shares which are traded on international stock exchange.
Simply, they are derivative equities which are traded in foreign markets, giving rights to shareholders for respective amount of local securities. In such case, shareholders are entitled to all dividends and capital gains. Thus, GDR allow investors in any country to purchase shares of company in any other country without losing the income or trading flexibility. GDR is also called as International Depository Receipt or Euro Depository Receipt. GDR is a financial instrument used by private markets to raise capital denominated in either U.S. dollars or euros. GDR facilitates trade of shares importantly in emerging markets.
Procedure for issue of GDR in a company
Advantages of GDR to issuing company
Accessibility to foreign capital markets
Increase in visibility of the issuing company
Rise in the capital because of foreign investors
Advantages of GDR to investor
Helps in diversification, hence reducing risk
More transparency since competitor’s securities can be compared