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covering exciting investing ideas and opportunities in India.
American Depository Receipts or ADR's are financial instruments just like shares but traded on US exchanges.
A handful of Indian companies have ADRs listed in the US. How these ADRs traded the previous day could give clues about the opening levels of these companies in India.
Indian companies that are willing to raise funds from the US can list their stocks, denominated in US dollars, via ADRs.
For example, an American citizen willing to invest in Infosys in the US can do so by purchasing Infosys ADR that is listed on the New York Stock Exchange (NYSE).
Indian companies cannot directly list their equity shares on any international exchange.
So, in order to facilitate trading, the companies give their shares to a US financial institution, typically a bank.
The bank holds the stock as inventory and issues the ADR for trading in the US.
ADRs are priced and traded in US dollars and are cleared through the US settlement systems.
Accordingly, ADR holders neither transact in any foreign currency nor face currency fluctuation risk.
The issuance of an ADR is governed by the Securities and Exchange Commission (SEC), the market regulator of the US.
Companies have to provide the respective US Bank with detailed information as a requisite to issue ADRs.
The ADRs are listed on major US stock exchanges like NYSE or the NASDAQ. They can also be sold over the counter.
Apart from Infosys, companies like ICICI Bank, Wipro, Tata Motors, HDFC Bank, and Dr Reddy's Laboratories have listed ADRs.
For more, check out the entire list of Indian ADRs.
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