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ADR, GDR, and Direct Listings 2023: Insights and Regulations



  Nov 02, 2023

ADR and GDR and Direct Listings 2023



Q1: What is an ADR (American Depository Receipt)?

A1: An ADR, or American Depository Receipt allows U.S. investors to invest in foreign companies which issue receipts instead of shares which are almost the same. Non-US companies through this mechanism can get listed on US stock exchanges.

Q2: What is a GDR (Global Depository Receipt)?

A2: A GDR, or Global Depository Receipt, is similar to an ADR but is issued and traded in international markets outside the United States. GDRs also represent shares in a foreign company and enable international investors to invest in that company’s stock.

Q3: Why are ADRs and GDRs used by Indian companies?

A3: Indian companies use ADRs and GDRs as a means to access international capital markets and raise funds by allowing foreign investors to trade their shares on international stock exchanges.

Q4: What is the recent change in Indian regulations regarding listings on foreign exchanges?

A4: The recent change permits Indian companies to list directly on foreign exchanges, eliminating the need for ADRs and GDRs. This change is intended to provide Indian companies with more flexibility and opportunities for international listings.

Q5: When did this change come into effect?

A5: The change came into effect on October 30, 2023, when the relevant section (Section 5) of the Companies (Amendment) Act, 2020, was enforced by the Central Government.

Q6: Are there any specific conditions or rules associated with this change?

A6: While the change allows Indian companies to list directly on foreign exchanges, the specific conditions and rules for such listings are yet to be notified. The government is expected to provide guidelines and regulations regarding this process in the future.

These FAQs provide definitions of ADRs and GDRs and explain the recent change in Indian regulations that allows companies to list directly on foreign exchanges. It highlights that detailed conditions and rules for such listings are pending notification by the government.


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