Global

Depository
Receipts (GDR)
Compliance,
Procedure and Listing

What is a GDR?

It is an instrument in the form of a depository

receipt or certificate created by the Overseas
Depository Bank outside India and issued to
Non- resident investor against the issue of
ordinary shares or Foreign Currency
Convertible Bonds of Issuing Company.

Eligibility for Issue of GDRs

An Indian corporate can raise foreign currency

resources abroad through the issue of Global
Depository Receipts (GDRs). Regulation 4 of
Schedule I of FEMA Notification no. 20 allows an
Indian company to issue its Rupee denominated
shares to a person resident outside India being a
depository for the purpose of issuing GDRs.

Conditions for Issue of GDRs

The GDRs are issued in accordance with the

Scheme for issue of Foreign Currency
Convertible Bonds and Ordinary Shares
(Through Depository Receipt Mechanism)
Scheme, 1993 and guidelines issued by the
Central Government thereunder from time to
time.
A GDR is permitted by RBI under Automatic
Route subject to the sectoral caps as specified
vide Press Note No.14 (1997 series) dated 8th
October 1997 issued by the Government of
India, Ministry of Industry.

Conditions for Issue of GDRs

contd

The company not covered under the Automatic route,

would need to obtain prior Government clearance
through FIPB.
There are no end-use restrictions on GDR/ADR issue
proceeds, except for an express ban on investment in
real estate and stock markets.
There is no limit up to which an Indian company can
raise GDRs.
There is no restriction on the number of Euro-Issues to
be floated by a company or a group of companies in a
financial year.

Conditions for Issue of GDRs

contd

Indian Companies engaged in the following sectors

were 80% of turnover is from these sectors in 3
previous financial years can issue GDRs to their NonResident/Resident Permanent Employees and also to
their subsidiary Companies:
a
Information Technology and Entertainment
Software.
b
Pharmaceuticals
c
Bio Technology

These Companies can also acquire overseas

companies in their respective areas of business
through stock swap as per the guidelines issued by the
government

Conditions for Issue of GDRs

contd

GDR can be issued in any convertible foreign currency.

The GDRs and the Shares to be represented by such

GDRs will not be offered, sold or delivered within the
United States or to or for the benefit of US persons as
per the United States Securities Act of 1933, as
amended (the "Securities Act") for a period of 40 days
from the date of opening of the Issue.

The GDRs may not be offered or sold directly or

indirectly in the Republic of India ("India") or to, or for the
account or benefit of, any resident of India.

Agencies Involved in the GDR Issue

Lead Manager -The firm should be registered with the

appropriate regulatory authority in Europe/ Singapore or
Japan.

Depository Is an Overseas Bank authorised by the

Issuing Company to Issue the GDRs.

Listing Agent - Is a person who is responsible for the

listing of the GDRs at any of the recognized Overseas
Stock Exchanges. Generally the Depository also acts as
the Listing Agent.

Agencies Involved in the GDR Issue

contd

Custodian - It is the domestic Bank who holds the

underlying shares/ Bonds Issued against the GDRs.

Indian Legal Counsel - It is a firm that undertakes the

Legal and Financial Due Diligence of the Issuing
Companies on behalf of the Lead Manager. It also
assists the Company in preparation of the Information
Memorandum/ offer document for submitting it with the
Overseas Stock Exchange.

Agencies Involved in the GDR Issue

contd

UK Counsel - An overseas legal person who based on

the Due Diligence Report of the Indian Counsel submits
its report to the Overseas Stock Exchange. They also
assist the Lead Manager in preparation of the various
documents such as the Deposit Agreement, Subscription
Agreement and vet the Information Memorandum (IM).

Escrow Agent - An Overseas Bank where an Escrow

Account has to be opened for deposit of the monies
received from Investors against the GDR Issue till the
Final Listing Approval is obtained from the Overseas
Stock Exchange

Procedure for Issue of GDRs

Convene a Board Meeting to approve the proposed

GDR Issue for not exceeding certain value in foreign
currency.
Convene the EGM for the approval of the
shareholders for the proposed GDR Issue under Sec
81(1A) of the Companies Act, 1956.
Identify the Agencies
Convene a Board Meeting to approve the Agencies.
Appoint the Agencies and sign the Engagement
Letters.
The Indian Legal Counsel to undertake the Due
Diligence.

Procedure for Issue of GDRs

contd

Prepare the first draft of the IM in consultation with the

Indian Legal Counsel and submit the same to various
Agencies for their comments thereon.
Prepare the 2nd/3rd draft of IM incorporating the
comments.
The Listing Agent to submit the IM with the overseas
Stock Exchange for their comments and In principle
Listing Approval.
Simultaneously submit draft IM to the Indian Stock
Exchanges where the Issuing Companys shares are
listed for In principle approval for listing of the underlying
shares.

Procedure for Issue of GDRs

contd

Hold Board Meeting to approve the Deposit

Agreement, Subscription Agreement and the Escrow
Agreement.
On receipt of the comments on the IM from the
Overseas and Indian Stock Exchanges incorporate
the same and file the final IM with Overseas Stock
Exchange and obtain Final Listing.
The Issuing Company can open the Issue for the
GDR on receipt of the In principle Listing Approval
from the Overseas and the Indian Stock Exchanges.

Procedure for Issue of GDRs

contd

Open the Escrow Account with the Escrow Agent and

execute the Escrow Agreement.

In consultation with the Lead Manager to finalize

whether the GDR will be through public or a private
placement,
the number of GDRs to be issued.
the issue price. (the Issue price is normally 5-10 %
discounted prevalent market price of the shares of
the Issuing Company one day prior to the opening
of the GDR Issue.
number of underlying shares to be issued against
each GDR.

Procedure for Issue of GDRs

contd

On the day of the opening of the Issue execute the

Deposit and Subscription Agreements.

The Issue should be kept open for a minimum period of

3 working days.

Immediately on closing of the Issue convene a Board/

Committee Meeting for allotment of the underlying
shares against the Issue of the GDRs.

Then Deliver the share certificate to the Domestic

Custodian Bank who will in terms of the Agreement
instruct the Overseas Depository Bank to Issue the
GDR to Non Resident Investor against the shares held
by the Domestic Custodian Bank.

Procedure for Issue of GDRs

contd

On receipt of Listing Approval from Overseas Stock

Exchange submit the required documents for Final In
principle Listing approval from Indian Stock Exchange.

After GDRs are listed the Lead Manager to instruct the

Escrow Agent to transfer the Funds to the Companys
Account.

The Company can either remit the entire funds or in part

as per its discretion.

Procedure for Issue of GDRs

contd

On obtaining the Final Approval from Indian Stock

Exchanges admit the underlying shares to the depository
i.e., NSDL and CDSL.

Obtain Trading approval.

Intimate the Custodian for converting the physical shares

into Demat.

Other Reporting Compliances and

Issues

Within 30 days of the closing of the GDR issue, details of

the GDR Issue along with the IM should be submitted to
the Ministry of Finance.
the Registrar of Companies
SEBI

Return of Allotment in Form 2 is to be filed with ROC

within 30 days of Allotment.

Annexure C is to be filed with RBI, Central office within

30 days of closure of the GDR Issue.

Other Reporting Compliances and

Issues

The Company should furnish quarterly return in

Annexure D to the RBI, Central office for every
calendar quarter.

The Issue related expenses (covering both fixed

expenses like underwriting commissions, lead
managers charges, legal expenses and other
reimbursable expenses) shall be subject to a ceiling of
4% in the case of GDR.

The GDR holders shall not have any voting rights.

Conversion and Transfer of GDRs

The holder of the GDR can transfer/sell the GDR in the

Overseas Stock Exchange or request the Depository to
cancel the GDR and release the underlying shares to his
account.

On acquiring the shares, the GDR holder becomes the

member of the Company and he can trade his shares in
the Indian Stock Exchanges.

A registered broker in India may, with the permission of

the custodian purchase shares of an Indian Company on
behalf of a person resident outside India in the
recognized Stock Exchange in India and deposit the
same with the custodian for the purpose of converting
the shares into GDRs.

Conversion and Transfer of GDRs

contd

the number of shares so purchased shall not exceed

GDRs converted into underlying shares and shall be
subject to sectoral caps as applicable.

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