Features of Global Depositary Receipt (GDRs)
The distinct features of separate instalment of the Global Depositary Receipts (GDRs) make these financial instruments unique. Such characteristics make them popular not only among issuers but also among the investors in the international financial institutions. Here are the key features of GDRs:
1. Denomination in Foreign Currency: GDRs are undated in a foreign currency. This foreign currency denomination, usually in dollars or euros that renders GDRs more salable and fungible for foreign investors.
2. Issued by Depositary Banks: Depositary banks serve as intermediaries between a foreign company and investors; they create and manage the GDRs. These banks enable the issuance, trading, and conversion to ordinary shares, which amounts to redemption of GDRs.
3. Underlying Shares Held in Custody: The depositary bank acts a custodian of the actual shares of the foreign company. These underlying shares remains safe and the bank issues GDR against them. The size of the arrangement at $2.5 billion is also adequate for the redemption of about 20% of gospel designated notes 9 in the first three years, which is a useful size of redeeming each year in the absence of 9 GDR, so that the redemption would not affect the GDP, neither be impracticable.
4. International Listing: GDRs are shown and traded on reputable world stock exchanges for the investors to buy and sell GDRs globally on the stock exchanges that are established well. This listing brings the liquidity and the visibility.
5. Sponsored and Unsponsored GDRs: Sponsored and unsponsored GDRs are possible. In the case of sponsored GDRs, companies help by cooperation and their endorsement when it comes to signing the documents, and for the case of unsponsored, companies are involved indirectly with the help of financial institutions which create GDRs without their interest or participation.
6. Dividend Payments and Corporate Actions: In some cases GDR holders are allowed to get benefits dividends and also able to participate in corporate actions like stock splits or mergers in manners similar to the underlying shareholders. The depositary bank oversees appropriate distribution dividends and that it ensures that GDR holders enjoy the advantages of ownership.
7. Convertible to Underlying Shares: As a general rule, GDRs may in most cases be converted into the issuing shares they reflect. The conversion feature presents the investors with a mechanism through which it enables them to shift from the holding of GDRs to direct premium in the foreign firm.
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