Depository Receipt
A negotiable instrument issued in one country that represents shares of a company listed in another.
Formula
Underlying Shares Represented = Number of Receipts x Receipt Ratio
Unit
shares
In depth
A depository receipt lets a foreign investor hold an Indian company's economic exposure without opening an Indian account, with a custodian bank holding the actual shares. Indian companies have used ADRs in the United States and GDRs in Europe for exactly this purpose. Each receipt represents a fixed ratio of underlying shares, so the receipt price should track the home-market price adjusted for the ratio and the exchange rate; persistent gaps invite arbitrage where conversion is permitted. The receipt is not a separate claim on the company — the same shares sit behind it, and dividends flow through the custodian.
Worked example
One ADR represents two underlying shares. The Indian share trades at ₹830 and USD/INR is 83.00, so the fair ADR price is 2 x 830 / 83 = USD 20. An ADR at USD 21 is trading at a 5% premium to its home-market value.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Depository Receipt” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.