Strategic Management and Corporate Finance · Foreign Funding - Institutions

Depository Receipts: ADR, GDR and IDR Explained

Updated 11 October 2026 · Fact-checked

A depository receipt (DR) is a negotiable instrument issued by a depository bank against shares of a company held with a custodian. ADRs are issued in the US, GDRs outside the home country (usually to investors in several markets outside the US), and IDRs by foreign companies in India. Answer by stating meaning, parties, features, eligibility and regulation.

Understand Depository Receipts: ADR, GDR and IDR

A depository receipt lets investors in one country hold the shares of a company from another country without buying them directly on the foreign exchange. The company deposits its shares with a custodian in its home country. A depository bank abroad issues receipts against those shares. The receipts trade on a foreign exchange like shares.

The American Depository Receipt (ADR) is the US-specific form. It is issued in the United States and trades on a US market. The Global Depository Receipt (GDR) is a receipt issued outside the issuer's home country, usually to investors in multiple markets and typically outside the US, for example in Europe. A GDR can also be issued in a single foreign market. GDRs are typically listed on a stock exchange such as Luxembourg or London, or at an international exchange. An Indian company can also use the IFSC route, which the IFSC chapters cover.

The Indian Depository Receipt (IDR) works in reverse. A foreign company deposits its shares with an overseas custodian. A domestic depository in India issues IDRs to Indian investors, and they list on Indian stock exchanges. IDRs are issued under Section 390 of the Companies Act, 2013, read with the Companies (Registration of Foreign Companies) Rules, 2014 and the SEBI (Issue and Listing of Indian Depository Receipts) Regulations.

For Indian issuers of ADRs and GDRs, the framework is the Depository Receipts Scheme, 2014, along with FEMA rules. Under the Scheme, shares of an Indian company can be issued or transferred to a foreign depository to be converted into DRs. Voting rights of DR holders are exercised according to the deposit agreement. Where the agreement provides, the depository exercises them on the holder's instructions.

DRs help companies raise foreign currency capital, widen the investor base and build global visibility. The costs are listing and compliance burden, exchange rate exposure on dividends, and possible dilution of control.

Key rules to remember

DR structure: Underlying shares → Custodian → Depository bank → Depository receipts → Foreign investors; The route for ADR and GDR. For IDR, the foreign company's shares sit with an overseas custodian and the domestic depository issues IDRs in India.
DR ratio: Price of one DR = Price of one underlying share × Number of shares represented by one DR; Adjust for exchange rate if prices are in different currencies. This gives the theoretical parity price. Actual DR prices trade at a premium or discount to it, so add any premium or discount if the question gives it.
Rupee price of DR: Price in ₹ = Price in foreign currency × Exchange rate (₹ per unit); Use the rate given in the question. Convert before comparing with the share price.
Key distinction: ADR: the US-specific DR, issued in the US | GDR: a DR issued outside the home country, usually to investors in multiple markets and typically outside the US | IDR: foreign company issuing in India; This is the core comparison for exam answers.
Governing norms: Indian issuer of ADR/GDR: Depository Receipts Scheme, 2014 and FEMA | IDR: Companies Act, 2013 and SEBI norms; Name the regime first, then the conditions.

How to solve Depository Receipts: ADR, GDR and IDR questions

Use this method for any written question on depository receipts, whether theory or case-based.

1Define the depository receipt in one line and name the parties: company, custodian, depository bank and investors.
2Identify which instrument the facts involve: ADR, GDR or IDR. Check who the issuer is and where investors sit.
3State the governing law: Depository Receipts Scheme, 2014 and FEMA for Indian issuers abroad; Companies Act, 2013 and SEBI norms for IDRs.
4List the relevant features and eligibility points that apply to the facts. Do not list everything.
5If numbers are given, compute the DR price using the ratio and exchange rate, step by step.
6Apply the law to the facts: is the issuer eligible, is the route allowed, what approvals or filings are needed.
7Give a clear conclusion. Add advantages and disadvantages if the question asks for evaluation.

Quickest way: Three-line DR identifier

When to use it: Use when a case question gives a short fact pattern and you must name the instrument and the rules fast.

Ask: who is the issuer and where do the investors sit? Indian company with foreign investors means ADR or GDR. Foreign company with Indian investors means IDR.
Write the structure line: shares to custodian, receipts by depository, listing abroad (or in India for IDR).
Add the governing regime and one advantage and one risk. Then conclude.

Common mistakes in Depository Receipts: ADR, GDR and IDR

Treating IDR as a way for Indian companies to raise money abroad.
The name sounds similar to ADR and GDR.
Fix: Remember the direction: IDR is issued in India by a foreign company. ADR and GDR are issued abroad by an Indian company.
Saying the DR holder is the legal owner of the shares with full voting rights.
Students equate the receipt with the share.
Fix: The custodian holds the shares on behalf of the depository. Voting rights of DR holders are exercised according to the deposit agreement, and the depository exercises them on the holder's instructions where the agreement provides.
Mixing up ADR and GDR as the same market.
Both are foreign-currency instruments of an Indian company.
Fix: ADR is the US-specific form, issued in the US. GDR is issued outside the home country, usually to investors in multiple markets and typically outside the US, listed in Europe or at an international exchange.
Quoting the Companies Act alone for ADR and GDR issues by Indian companies.
Students stay with company law and skip FEMA and the Scheme.
Fix: Cite the Depository Receipts Scheme, 2014 and FEMA rules first, then the Companies Act provisions such as shareholder approval.
Forgetting exchange rate conversion in numerical questions.
Students rush to apply the DR ratio.
Fix: Convert currency first, then apply the ratio, and state units in each line.

Worked examples

Example 1

Each GDR of Arjun Textiles Ltd represents 5 equity shares. The share trades at ₹240 on the NSE. The exchange rate is ₹80 per US dollar. Ignoring costs, find the theoretical price of one GDR in US dollars.

Show the solution

Price of 5 shares = 5 × ₹240 = ₹1,200.
Convert to dollars: ₹1,200 ÷ 80 = $15.
Check: ₹240 ÷ 80 = $3 per share; 5 × $3 = $15.
Note: this is the theoretical parity price. The actual GDR price in the market trades at a premium or discount to it.

Answer: The theoretical (parity) price of one GDR is $15. The actual market price may be higher or lower.

Example 2

Explain how an Indian company would use GDRs to raise foreign capital, and state two advantages and two disadvantages.

Show the solution

Meaning: a GDR is a negotiable instrument issued by an overseas depository bank against shares of the company held with a domestic custodian.
Mechanism: the company issues shares, which the custodian holds. The depository bank issues GDRs to foreign investors, and they list on an overseas exchange.
Regulation: the issue follows the Depository Receipts Scheme, 2014 and FEMA rules, along with the board and shareholder approvals required under the Companies Act, 2013.
Advantages: access to foreign currency funds and a wider investor base; improved global visibility.
Disadvantages: listing and compliance cost abroad; exchange rate risk on dividends, and possible dilution of control.

Answer: The company deposits shares with a custodian, the overseas depository issues GDRs listed abroad, under the Depository Receipts Scheme, 2014 and FEMA. It gains foreign funds and visibility but bears cost, currency risk and dilution.

Exam tips

Begin every answer with the structure: company, custodian, depository, investors. It earns easy marks.
Prepare a short comparison of ADR, GDR and IDR covering issuer, market, regulator and listing.
In case questions, cite the Depository Receipts Scheme, 2014 and FEMA for Indian issuers, and do not stop at the Companies Act.
Always give a conclusion on eligibility or route after applying the facts.
Learn two advantages and two disadvantages. Evaluation questions are common.

Practice questions from Foreign Funding - Institutions

Depository Receipts: ADR, GDR and IDR in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CFA Level IDepository Receipts and Foreign Listings

Depository Receipts: ADR, GDR and IDR: frequently asked questions

What is the difference between ADR and GDR?

An ADR is the US-specific form, issued in the United States and traded on a US market. A GDR is issued outside the issuer's home country, usually to investors in multiple markets and typically outside the US, and is listed in Europe or at an international exchange. Both are issued by a foreign depository against shares held by a custodian.

What is an Indian Depository Receipt?

An IDR is issued in India by a foreign company through a domestic depository against shares held by an overseas custodian. It lists on Indian stock exchanges and lets Indian investors take exposure to a foreign company in rupees.

What is the Depository Receipts Scheme, 2014?

It is the Indian framework that allows shares and other securities of Indian companies to be issued or transferred to a foreign depository for conversion into depository receipts. It works together with FEMA rules.

What are the main advantages and disadvantages of GDRs?

Advantages include foreign currency funds, a wider investor base and global visibility. Disadvantages include listing and compliance cost, exchange rate risk and possible dilution of control.