CONCEPT OF ADR, GDR, P.NOTES & IDR. Presented By Nitin Agarwal

American Depository Receipt ADR represents ownership in the shares of a non-U.S. company that trades in U.S. financial markets. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies. ADR is issued by a U.S. depository bank and can represent a fraction of a share, a single share, or multiple shares of the foreign stock The price of an ADR often tracks the price of the foreign stock in its home market

Cont… The first ADR was introduced by JPMorgan in 1927, for the British retailer Selfridges&Co There are currently four major commercial banks that provide depositary bank services - JPMorgan, Citibank, Deutsche Bank and the Bank of New York Mellon. One can either source new ADRs by depositing the corresponding domestic shares of the company with the depositary bank one can obtain existing ADRs in the secondary market. and then swapping them for ADRs; these swaps are called crossbook swaps and on many occasions account for the bulk of ADR secondary trading. This is especially true in the case of trading in ADRs of UK companies where creation of new ADRs attracts a 1.5% stamp duty reserve tax (SDRT) charge by the UK government; sourcing existing ADRs in the secondary market (either via cross book swaps or on exchange) instead is not subject to SDRT.

Global Depository Receipts A Depository Receipt Convertible into a fixed number of Equity Shares. Can be converted at any time. Negotiable: Listed and traded on Foreign Stock Exchange. Carry on voting rights until conversion. Rupee dividends before and after conversion. Traded on Indian Stock Exchange after conversion

Participatory Notes Participatory notes are instruments that derive their value from an underlying financial instrument such as an equity share. Participatory notes are instruments used for making investments in the stock market Participatory notes are not registered with the SEBI to invest in Indian Securities It rose from 32% late last year to 51.6% by August 2007. Participatory notes are popular because they provide a high degree of anonymity, which enables large hedge funds to carry out their operations without disclosing their identity Participatory notes are like contract notes transferable by endorsement and delivery

Indian Depository Receipt An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities Markets.

Eligibility Criteria Given Under IDR Pre‐issue paid‐up capital and free reserves of at least US $ 50 million and have a minimum average market capitalization (during the last 3 years) in its parent country of at least US$ 100 million; A continuous trading record or history on a stock exchange in its parent country for at least three immediately preceding years; A track record of distributable profits for at least three out of immediately preceding five years; Listed in its home country and not been prohibited to issue securities by any Regulatory Body and has a good track record with respect to compliance with securities market regulations. The size of an IDR issue shall not be less than Rs. 50 crores

Requirements For Investing In Idrs IDRs can be converted into the underlying equity shares only after the expiry of one year from the date of the issue of the IDR IDRs can be purchased by any person who is resident in India as defined under FEMA. Minimum application amount in an IDR issue shall be Rs. 20,000. Investments by Indian companies in IDRs shall not exceed the investment limits, if any, prescribed for them under applicable laws In every issue of IDR— (i) At least 50% of the IDRs issued shall be subscribed to by QIBs; (ii) The balance 50% shall be available for subscription by non‐institutional.

THANK YOU