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Depository Receipts are – Basically negotiable instruments denominated in U.S. dollars. Whereby an Issuer or a non-U.S Indian company tap the global equity market to raise foreign fund thru it’s public listing and trading it in local currency equity shares in form of “Depository Receipts”

These Depository Receipts may be traded freely on an exchange or an over-the-counter market.

Depository Receipts can be either “GDRs” which are usually listed on a European stock exchange, or American Depository Receipts (“ADRs”), listed on the US stock exchange.

To understand the concept of FCCBs/ADRs/GDRs lets first understand the Euro equity issue first.

Euro equity represents shares that are denominated in dollars and are issued by either non-American or non-European companies. These shares are then listed on American and European stock exchanges by complying to their regulations.

Top 3 Goals of floating DR

Goals of floating DR
  • Diversify investor base
  • Enhance visibility and global presence
  • Increase liquidity

4 Different Forms of Euro Equity Issue:

Different Forms of Euro Equity Issue
  1. Global Depository Receipts (GDR)
  2. American Depository Receipts (ADR)- #Popular
  3. European Depository Receipts- #Popular
  4. Singapore Depository Receipts

It’s just that the name differs but the features are identical for these equities confirming norms and rules pertaining to respective countries where these are issued and listed.

#1: Global Depository Receipts (GDR)

GDR equity shares are denominated in dollar and tradable on a stock exchange in Europe or USA. For example, a GDR of $100 may comprise of 2 equity shares of $50 each amounting to whatever the prevailing exchange rate is.

Main features of GDR:

  • GDR represents certain number of equity shares denominated in dollar terms
  • The issuer collects the proceeds in foreign currency
  • GDRs are traded on stock exchanges of Europe and USA
  • And funds are raised from foreign capital market of the USA and Europe
  • All shares to be issued are deposited with an intermediary called ‘depository’ located in the listing country
  • The Depository issues a receipt against these shares
  • Each receipt has a fixed number of shares usually 2 or 4
  • The shares issued to the depository may be in physical possession of another
  • Intermediary called ‘custodian’ who acts as depositor’s agent.
  • The equity shares registered in the name of depository are then issued in form of GDR to the investors of that foreign country
  • The GDR does not appear in the books of the issuing company
  • ADR or GDR holders do not have voting rights and therefore not bound by strict definition of foreign ownership
  • Two-way fungibility is permitted in GDRs whereby they are freely convertible into Shares and back into GDRs without restriction to the extent of the original issue size.
  • The issue of GDR is governed by international laws
  • Since GDR is also denominated in rupees, hence, GDR does not carry any exchange risk as its face value is protected against the exchange risk
  • GDRs are listed at Luxembourg and traded at two other stock exchanges namely,
  • The OTC market in London and in the USA by private placement
  • NRIs and foreign residents can buy GDR by using their regular share trading account

Still not clear? Don’t hesitate to write to MUDS at [email protected] or call MUDS at +91 7011198909 for Free Consultation !

#2: American Depository Receipts (ADR)

Devised in the late 1920s to help Americans invest in overseas securities. The main reason for introducing ADRs were the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values.

GDR v/s ADR:

  • There is not much different between GDR and ADR. Few of the differences includes- GDR can be issued in the USA and other European countries. It is listed on the stock exchanges of USA and Luxembourg.
  • Whereas, ADRs are denominated in US dollars, issued and traded on USA USA stock exchange only.

Procedural Requirements for a GDR/ADR

  • Legal and accounting due diligence on Issuer in lines of the GAAP accounting principals accepted in the US
  • Authorization by the shareholders
  • Application for listing the additional shares on the Indian Stock Exchange
  • Filing
  • Facilitate and arrange Legal and Accounting Due Diligence on the Issuer
  • Approval of the Foreign Investment Promotion Board (‘FIPB’)

Like ADR and GDR there are”Other depository receipts” depending on the country where it’s issued. Euro
equity issued in European countries is called as European Depository Receipts (EDRs) #3

In Singapore is called as Singapore Depository Receipts #4

Debts raised in form of bonds from international capital complying to regulations of the respective country is called as Euro Debt.

Still not clear? Don’t hesitate to write to MUDS at [email protected] or call MUDS at +91 7011198909 for Free Consultation!

Types of Euro Debt

Types of Euro Debt
  • External Commercial Borrowings (ECB)
  • Foreign Currency Convertible Bonds (FCCB)- #Popular
  • Foreign Currency Exchangeable Bonds (FCEB)
  • Euro Bonds

Foreign Currency Convertible Bonds (FCCB)

Foreign currency convertible bond (FCCB) is a convertible bond issued by an issuer company in a country whose currency different from its own currency. A company can raise funds in the form of foreign currency by this instrument.

FCCB are bonds issued in accordance with the scheme defined by Ministry of Finance, Government of India.

Salient features of FCCB:

  • The bonds are issued in a currency different from that of the issuing country for the purpose of fundraising.
  • FCCBs can be subscribed by a non- resident in foreign currency
  • They collectively act like debt and equity instruments whereby regular payment of interest and a principal payment on maturity is made.
  • At the same time, these bonds also give the bondholder the choice to convert them into ordinary shares, either in whole or in part.

Common Terms in EURO Issues- You should know!

Common Terms in EURO Issues


A company that plans to tap the foreign market through DRs complying with the global issue mechanism. The Issuer will, along with the Lead Manager to the issue decide the following issues, namely:

  1. Public-private placement
  2. The number of GDRs/ADRs to be issued
  3. The issue price

Lead Manager

The lead manager is the person responsible for marketing the issue. He also advises the Issuer what type of security should be issued like equity, bonds, FCCB along with the rate of interest as per coupon rate, the price of the security (conversion price), etc.

Co- Managers/ Underwriters

They assist the Lead Manager in fulfilling his obligations


It is the bank authorized by the Issuer to issue GDRs/ADRs against the issue of ordinary shares of the Issuer (the “Depository”). It is the overseas agent of the Issuer


It is the banking company (situated in India), acting as a custodian for the ordinary shares of an Indian Company, issued by it against GDRs/ADRs. The Custodian acts in coordination with the Depository. The physical possession of the shares is with the Custodian.

Legal Advisors

They assist the Issuer, Lead Manager, Co-Managers and the Underwriters in the preparation of the prospectus, depository agreement, indemnity agreement and subscription agreement and help the Issuer to comply with proper disclosures relating to the issue.


The Issuer must appoint auditors who will prepare the auditor’s report for inclusion in the prospectus, provide requisite consent and comfort letters and reconcile the Issuer’s accounts with International accounting standards (the “Auditors”)

Why Muds:

We undertake complete documentation work and we take the onus of fulfilling all complex formalities related to floating of these issues. Our pre-screening programs are revered and well adapted to the

market dynamics and give a clear picture to our clients of the ensuing prospects. We also do an exhaustive due diligence and a detailed assessment before and after floating of FCCBs, ADRs & GDRs. Our services include complete range of formalities and procedures connected with the issuance, right from the start.

Contact details of professionals at MUDS

MUDS undertake following activities during floating GDR, ADR and FCCBs:

  • Assessment of the GDR markets
  • Help issuer select the Lead Manager, Custodian bank
  • Work closely with a lead Investment Banker under Securities and Exchange Commission in the US, or under Financial Services Act in the UK, or the appropriate regulatory authority in Europe
  • Co-ordinate with team consisting of legal, technical, and financial key persons from the Lead Manager, Co-Managers, Underwriters, Legal Advisors, and Auditors would visit the Issuer for carrying on legal and accounting due diligence.
  • Finalize the issue structure with the Lead Manager
  • Advise on size, pricing and marketing of the issue.
  • Help select the with the Lead Manager and custodian bank.
  • Coordinate on duties of team of legal counsel on Deposit Agreement and securities law matters
  • Coordinate with technical & financial experts and represents meetings of issuers, analysts
  • Help formulate the pricing for these issues as per prescribed norms
  • Provide advice/perspective on type of program, exchange or market on which to list or quote
  • Advise on Basic Ratio e.g 1 ADR issued for how many shares
  • Help in furnishing and preparing full details in prescribed form of the issue with RBI
  • Enables companies to list ADRs/GDR on NASDAQ and NYSE
  • Provide a certificate to the RBI and the SEBI stating the sectoral caps for foreign investment and it includes following:
    • Reporting to the RBI
    • Stock Exchanges Approval
    • Filings with SEBI
    • Application of avoidance of double taxation agreement
    • Stamp Duty and Transfer Tax
    • Other Approvals
    • Prepare a quarterly return in the prescribed form to the Reserve Bank
    • Preparing details of all expenses related to issuance, getting further approval from RBI in case of reimbursable ceiling limit on expenses exceeds.
  • Perform all reporting requirements such as:
    • Preparing comprehensive report after issuance like the purpose of raising the GDR.
    • Details about Depository, Lead Manager, Sub-Managers to the Issue, Indian Custodian
    • Details of NIC code in case of rerouting, details of authorized and issued paid-up capital after the issue
  • Details of listing arrangements
    • Amount raised and the amount repatriated
    • Preparing Main Agreements and Related Documents
    • In Case of GDR issue
    • Escrow Agreement
    • Placing Agreement for Lead Manager and the Issuer
    • Deposit Agreement to be executed by the Depository

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