ADR / GDR

Imagine a restaurant that cannot legally open a branch in a foreign city, but instead arranges for a local partner to hold its exact recipe and ingredients in trust there, issuing locally tradeable vouchers that represent a claim on that specific dish, letting foreign diners effectively buy and sell access to the original restaurant's food without it ever physically operating abroad. American Depositary Receipts and Global Depositary Receipts let a company's shares trade abroad through almost exactly this kind of intermediated arrangement.

An ADR is a certificate issued by a US bank representing a specific number of shares in a foreign company, in this case an Indian one, held in custody back in India. The ADR itself trades on a US exchange, denominated in dollars, letting American investors buy and sell exposure to an Indian company without needing to directly open an Indian brokerage account or deal in rupees at all. A GDR works on the same underlying principle but is typically listed on exchanges outside the US, London and Luxembourg historically being the most common.

For the Indian company, issuing ADRs or GDRs is a way to raise capital directly from international investors and gain a listed presence, and the associated visibility and credibility, on a major global exchange, without needing to conduct a full separate public offering process in that foreign jurisdiction under that country's own securities law from scratch.

The underlying Indian shares backing an ADR or GDR remain held in custody in India throughout, the depositary receipt itself is simply a tradeable claim on those underlying shares, which is why ADR and GDR prices track the underlying Indian share price closely, adjusted for the prevailing exchange rate, rather than moving independently based on separate foreign market dynamics.

Whenever a well-known Indian company is described as being "listed on the New York Stock Exchange" in addition to Indian exchanges, that US listing is almost always through an ADR structure specifically, not a literal separate share issuance under US securities law, letting the company access American capital and investor visibility while its actual shares continue to be held and settled within the Indian market infrastructure.