Global Depositary Receipt [GDR]

By : Neha Dhyani

Updated : Apr 19, 2022, 18:02

Global Depositary Receipt (GDR) can be described as a type of bank certificate that is issued in more than one country to purchase shares of an international company. GDRs include shares in at least two markets most often those in both the U.S. market and the Euromarkets and are convertible security.

GDRs are usually utilized when an issuer seeks to raise capital on the local market, as well as in global or US markets, through private placements or public stock offering. Global depository receipt (GDR) is identical to the American depository receipt (ADR) with the exception that the ADR does not list the shares of a foreign country within the U.S. markets.

Global Depositary Receipt - Overview

The global Depositary Receipt (GDR) can be described as a form or bank document that represents shares of an international company in the sense that a branch in a foreign country that is part of an international banking institution is the one holding the shares. The shares themselves are traded like domestic shares, but worldwide, a variety of bank branches are able to offer the shares to purchase. Private markets utilize GDRs for raising capital that is backed by the form of U.S. dollars or euros. If private markets try to acquire the euro in lieu of U.S. dollars, GDRs are known as EDRs.

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Shares Per Global Depositary Receipt

Each GDR is a specific amount of shares within the specific company. A single GDR could represent anything from a fractional share to several shares, dependent on the type of layout. If the situation involves more than one share, the value for receipt indicates a value higher than the price for one share. Depository banks oversee and distribute various GDRs, and serve in international contexts.

Trading of Global Depositary Receipt Shares

The companies issue GDRs to attract the attention of foreign investors. GDRs offer a cheaper way for investors to take part. They trade as if they were shares from the country, however, investors are able to purchase shares on an international market. The bank that is a custodian bank typically takes ownership of the shares during transaction takes place, giving both parties security and making it easier for participants.

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FAQs on Global Depository Receipt [GDR]

Q.1. What are ADR and GDR?

Abbreviation ADR is American Depositary Receipt, while GDR is for Global Depository Receipt. ADR is an abbreviation for American Depository Receipt, which is a receipt issued by a US depository bank in exchange for a specific amount of shares of business non-US stocks that trade through the New York Stock Exchange

Q.2. What can I do to put my money into GDR?

The broker completes the transaction by either buying GDRs through any exchange on which it trades or by purchasing ordinary company shares on the domestic markets of the company through an agent located in the country of the issuer. The foreign broker then transfers securities to the banks that hold the shares.

Q.3. What are the details of a GDR Purchase by An Investor?

The broker completes the transaction by either buying Global Depository Receipts [GDRs]through any exchange it trades on or buying normal company shares on the domestic markets of the company through an agent in the country of the issuer. The foreign broker then transfers those shares back to the custodian institution.

Q.4. Do GDRs pay dividends?

GDRs give dividends in US dollars and are traded just like stock shares.