What is ADR/GDR – How Indian Companies Get Foreign Investors!Hello Traders!
You may have heard terms like ADR and GDR when companies talk about raising money abroad. These instruments allow Indian companies to get international investors without directly listing on foreign stock exchanges. Let’s understand them in simple words.
What is an ADR?
ADR stands for American Depository Receipt .
It is a certificate issued by a US bank that represents shares of a foreign company (like an Indian company). These ADRs trade on US stock exchanges just like normal US stocks.
Example: Infosys and Wipro have ADRs listed in the US.
Advantage: US investors can buy Indian companies without dealing with Indian exchanges.
What is a GDR?
GDR stands for Global Depository Receipt .
It works the same way as ADR, but instead of being limited to the US, GDRs are listed on global exchanges like London or Luxembourg.
Example: Many Indian companies raise funds through GDRs in Europe.
Advantage: Gives access to a larger pool of foreign investors.
Why Do Companies Issue ADR/GDR?
Access to Foreign Capital: Helps Indian companies raise funds from global investors.
Better Visibility: Being listed abroad increases global recognition of the company.
Diversified Investor Base: Attracts institutional investors who may not invest directly in Indian markets.
Liquidity: Allows more trading activity and easier buying/selling internationally.
Rahul’s Tip:
ADR/GDR listings are a sign that a company wants to expand globally and attract foreign capital. But as an investor, always check if the company is fundamentally strong before getting influenced by the “global listing” tag.
Conclusion:
ADR and GDR are simple tools that connect Indian companies with foreign investors.
While ADRs are limited to the US, GDRs open doors to global markets.
For long-term investors, these instruments show how Indian companies are scaling globally.
If this post made ADR/GDR clear for you, like it, share your thoughts in comments, and follow for more market education in simple language!
