Discuss the financial instruments used in an international financing

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Discuss the financial instruments used in an international financing

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  1. Various financial instruments used in International Financing include :

    (i) International Depository Receipts (IDR): It is a financial instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with SEBI) against the underlying equity of issuing company. It enables foreign companies to raise funds from the Indian Securities Market. The foreign company IDRs will deposit shares to an Indian Depository which in turn issues receipts equivalent to share amount to investors in India against the shares. The IDR holders enjoy all the benefits like shareholders excepts for voting rights to participate in the management of issuing company.

    (ii) Global Depository Receipts (GDR): It is the depository receipt denominated in US dollars issued by Depository Bank to which the local currency shares of a company are delivered. GDR is a negotiable instrument and can be traded freely like any other security. In the Indian context, a GDR in an instrument issued abroad by an Indian company to raise funds in some foreign currency and is listed and traded on a foreign stock exchange.

    (iii) American Depository Receipts (ADR): It is a depository receipt issued by a company in the USA. ADR is bought and sold in American Stock Market like regular stocks only to an American citizen and can be listed and traded on a stock exchange of the USA.