Q.What are Global Depository Receipts (GDRs)? State their significance to a business.

First define what a GDR actually is (a certificate against underlying shares), then explain the practical benefit it gives a company raising money abroad.

A Global Depository Receipt (GDR) is a negotiable certificate issued by a depository bank, representing a specified number of shares of a company. The depository bank holds the underlying shares, usually in the company's home market, and issues receipts against them that can then be bought and sold by investors on stock exchanges outside that home market, most commonly in Europe. Its significance to a business lies mainly in the access it provides: by issuing GDRs, a company can raise equity capital from a large and diverse pool of international investors without having to go through the process of directly listing its own shares on a foreign stock exchange. This widens the company's investor base beyond its domestic market, can improve its international visibility and reputation, and gives it an additional route to raise substantial capital for expansion, particul …

Students sometimes describe a GDR as a loan; it is important to be clear that a GDR represents equity/shares (ownership), not debt, and that the co …