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Question

Which of the following statements correctly describes the meaning of Indian Depository Receipt (IDR)?

A Issue of depository receipt in India against underlying equity shares of company incorporated outside India. Correct Answer Incorrect Answer
B Issue of depository receipts outside India against underlying debt securities of a company incorporated in India. Correct Answer Incorrect Answer
C Issue of depository receipt outside India against underlying equity shares of company incorporated in India. Correct Answer Incorrect Answer
D Issue of investment papers by international stock market to India Correct Answer Incorrect Answer
E Issue of Indian government bonds to foreign investors Correct Answer Incorrect Answer

Solution

Indian Depository Receipt (IDR) is a financial instrument denominated in Indian Rupees in the form of a depository receipt. The IDR is a specific Indian version of the similar global depository receipts (GDR) It is created by a Domestic Depository (custodian of securities registered with the SEBI) against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities Markets. The foreign company IDRs will deposit shares to an Indian depository. The depository would issue receipts to Indian investors against these shares. The benefit of the underlying shares (like bonus, dividends etc.) would accrue to the depository receipt holders in India.

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