Indian Depository Receipts

Indian depository receipts (IDRs) are securities that represent ownership of shares in an Indian company. They are typically traded on exchanges in India and in other countries, making them a convenient way for investors to buy and sell shares in Indian companies.

IDRs are issued by a bank or other financial institution that acts as a depository. The depository holds the underlying shares on behalf of the IDR holders and issues them certificates that represent the ownership of the shares.

IDRs are typically used by Indian companies that want to list their shares on foreign exchanges. This can help them to raise capital from investors in different countries and to increase their visibility in the global market.

MCQs on Indian depository receipts (IDRs)

  1. Which of the following is not a feature of Indian depository receipts (IDRs)?
    • They are traded on exchanges in India and in other countries.
    • They represent ownership of shares in an Indian company.
    • They are issued by a bank or other financial institution.
    • They are a type of security.
    • Answer: They are a type of currency.
  2. IDRs are typically used by Indian companies that want to:
    • List their shares on foreign exchanges
    • Raise capital from investors in different countries
    • Increase their visibility in the global market
    • All of the above
    • Answer: All of the above
  3. The depository that holds the underlying shares on behalf of the IDR holders is typically a:
    • Bank
    • Financial institution
    • Brokerage firm
    • All of the above
    • Answer: Bank
  4. IDRs are typically a more expensive way to invest in Indian companies than:
    • Buying shares directly on the Indian stock exchange
    • Buying shares through a mutual fund or ETF
    • Both of the above
    • None of the above
    • Answer: Both of the above
  5. IDRs offer some advantages over buying shares directly on the Indian stock exchange, such as:
    • They are more liquid
    • They are easier to trade
    • They offer more protection to investors
    • All of the above
    • Answer: All of the above

Conclusion

Indian depository receipts (IDRs) are a popular way for investors to buy and sell shares in Indian companies. They offer a number of advantages over buying shares directly on the Indian stock exchange, such as liquidity, ease of trading, and protection for investors.

Here are some additional points about IDRs:

  • IDRs are typically issued in US dollars, making them easier for investors to buy and sell.
  • IDRs are subject to the regulations of the Securities and Exchange Board of India (SEBI).
  • IDRs can be a good way to diversify your investment portfolio and to gain exposure to the Indian market.
  • IDRs are not without risk, so it is important to do your research before investing.

Indian depository receipts are a complex and ever-changing topic. Investors should seek the advice of a financial advisor before investing in IDRs.

Here are some additional points to keep in mind about IDRs:

  • IDRs are typically issued in multiples of 100 shares.
  • The depository charges a fee for holding IDRs.
  • IDRs are subject to foreign exchange risk.
  • IDRs are not as liquid as shares traded on the Indian stock exchange.