Question

What is the difference between GDR and ADR? Explain.

Answer 1

The abbreviation ‘GDRs’ refers to ‘Global Depository Receipts’, which are issued by depository banks against the shares of a company—for instance, the shares issued by an Indian company abroad in order to raise foreign currency. Global Depository Receipts are usually denoted in US dollars and can easily be converted into shares at any time. They can be listed and traded on the stock exchange of any country other than the US. On the other hand, ADRs, or American Depository Receipts, are receipts of companies based in the US. They are traded like any other securities in the market. However, the trading of ADRs is restricted only to the US securities markets, and these instruments can be sold to US citizens only.