Contents
Definition
A Global Depositary Receipt (GDR) is a negotiable instrument issued by an international depositary bank, representing ownership of a specified number of underlying shares in a company from another country. GDRs are listed primarily on the London Stock Exchange (LSE) or Luxembourg Stock Exchange and trade in US dollars or euros. They function identically to ADRs in structure but have a wider geographic distribution. Major Indian companies with active GDR programmes include ICICI Bank (LSE: ICIC), Infosys (LSE: INFY), Dr. Reddy's (LSE: REDY), and Reliance Industries. GDRs allow Indian companies to access European and global institutional capital without a full London listing.
How an Indian investor accesses this
Indian residents can purchase GDRs of any company through LRS-enabled brokers with international access to London or Luxembourg exchanges, within the USD 250,000 per year limit. In practice, retail access to London-listed GDRs is less streamlined than US-listed ADRs — most LRS platforms (Vested, INDmoney) focus on US equities; European GDR access typically requires a full international brokerage account (e.g., Interactive Brokers). NRIs with foreign bank accounts may access GDRs through their resident country's brokerage. SEBI prohibits Indian residents from being issued GDRs in primary offerings from India-domiciled companies — the participation route is secondary market purchase through LRS only.
Tax treatment
GDR gains and dividends are treated as foreign-source income. Capital gains: short-term (<24 months) at slab rate; long-term (≥24 months) at 20% with indexation — same as direct foreign equity. Dividend withholding depends on the country of listing and the applicable DTAA. For a UK-listed GDR of an Indian company, no UK dividend withholding applies (UK does not withhold on dividends to non-residents in most cases); however, the Indian company pays dividend distribution from its Indian earnings, so the Indian domestic dividend tax treatment may apply at the issuing level. Always verify the specific GDR's dividend pass-through mechanism before inferring withholding rates.
Currency consideration
GDRs trade in USD or EUR. For a USD-denominated GDR, the currency consideration is identical to a US-listed ADR: INR-USD movements affect rupee-converted returns. For EUR-denominated GDRs, the investor faces INR-EUR risk. The EUR/INR cross-rate adds a second layer of volatility relative to a pure USD position. Hedging EUR-denominated GDRs to INR is available only to institutional investors through forex derivatives; retail investors carry the full currency risk.
Worked example
ICICI Bank's GDR on the London Stock Exchange (ticker: ICIC) represents 2 underlying NSE shares per GDR. If ICICI Bank trades at ₹1,100 on NSE and INR-USD is ₹83/$, the theoretical GDR price = (1,100 × 2) / 83 ≈ USD 26.5. A European institutional investor buys ICIC GDR at USD 27 — a ~2% premium. An Indian resident buying ICIC GDR via LRS through a London brokerage account is effectively paying slightly above the NSE price for the convenience of dollar settlement and London liquidity.
See also
- American Depositary Receipt (ADR)
- US Stocks for Indian Investors
- Currency Hedging
- NRI Investing — Complete Guide
- ICICI Bank
Primary source
SEBI Circular — Issue of Foreign Currency Convertible Bonds and Ordinary Shares (GDR/ADR) Scheme 1993, as amended. RBI Master Direction — LRS (2023): rbi.org.in. London Stock Exchange — GDR market overview: londonstockexchange.com. This content is educational and not investment advice. MintByte is SEBI-registered (ARN-314872, APMI APRN-01658).