Tata Consumer Products recently said that it will delist its global depository receipts (GDRs) from the London Stock Exchange and Luxembourg Stock Exchange.
About Global Depository Receipts (GDRs)?
- It is a foreign currency-denominated negotiable financial instrument issued by a depositary bank.
- GDRs are certificates issued by a depository bank, which purchases foreign company shares and deposits them in the account.
- GDRs are commonly used to raise capital from international investors through public stock offerings or private placement.
- Indian companies can only get their shares listed on foreign exchanges through Global Depository Receipts (GDR).
- GDRs help Indian companies get foreign funds and gain access to international capital.
- The depository bank is the intermediary that acts as the custodian of the shares issued by the Indian company.
- The depository bank can convert GDRs into shares and trade them on the domestic stock exchanges.
- GDRs are instruments denominated in foreign currencies. The shares are denominated in the deposit receipt issuer's local currency.
- The value of a GDR depends on the value of the underlying share.
- GDRs are issued to investors throughout the country since they can be denominated as multiple forms of freely convertible currency.
- Only companies with a three-year sound financial record can get access to GDRs.
- Thus, Indian companies should get clearance from the Ministry of Finance and Foreign Investment Promotion Board (FIPB) to obtain GDRs.