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Which of the following is issued by an international financial institution to foreign companies/investors who wants to invest in a domestic company in India?
- a)Indian Depositary Receipts
- b)Commercial Paper
- c)Global Depositary Receipts
- d)Preference Shares
Correct answer is option 'C'. Can you explain this answer?
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Which of the following is issued by an international financial instit...
- Option A is incorrect: IDR is a depository receipt denominated in Indian rupees issued by a domestic depository in India. Much like an equity share, it is an ownership pie of a company. Since foreign companies are not allowed to list on Indian equity markets, IDR is a way to own shares of those companies. These IDRs are listed on Indian stock exchanges.
- Option B is incorrect: Commercial paper is a commonly used type of unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities.
- Option C is correct: A global depositary receipt (GDR) is a bank certificate issued in more than one country for shares in a foreign company. Each GDR represents a particular number of shares in a specific company. A single GDR can represent anywhere from a fraction of a share to multiple shares, depending on its design. In a situation that involves multiple shares, the receipt value shows an amount higher than the price for a single share. Depository banks manage and distribute various GDRs and function in an international context.
- Option D is incorrect: Preference shares, more commonly referred to as preferred stock, are shares of a company’s stock with dividends that are paid out to shareholders before common stock dividends are issued. If the company enters bankruptcy, preferred stockholders are entitled to be paid from company assets before common stockholders.
Most Upvoted Answer
Which of the following is issued by an international financial instit...
Global Depositary Receipts (GDRs)
Global Depositary Receipts (GDRs) are issued by international financial institutions to foreign companies/investors who want to invest in a domestic company in India. GDRs are financial instruments that represent an ownership interest in a company's shares. They are issued by international banks, typically in US dollars or other foreign currencies, and are traded on international stock exchanges.
Key Points:
- GDRs facilitate foreign investment in domestic companies by allowing investors to hold shares in the form of depository receipts.
- GDRs are denominated in foreign currency and are traded on international stock exchanges, making them easily accessible to foreign investors.
- GDRs are issued by international financial institutions, such as banks, and represent a specific number of shares in the domestic company.
- GDRs provide a way for foreign companies/investors to invest in Indian companies without the need to directly purchase and hold shares in the domestic company.
- GDRs can be listed on multiple international stock exchanges, which increases the liquidity and visibility of the domestic company's shares.
- GDR holders are entitled to receive dividends and capital gains from the underlying shares, and they can also convert their GDRs into the underlying shares if they choose to do so.
- GDRs offer foreign investors the opportunity to diversify their investment portfolios and gain exposure to the Indian market without the need for direct ownership of shares.
- GDRs also provide domestic companies with access to international capital markets and a broader investor base.
Conclusion:
In summary, Global Depositary Receipts (GDRs) are issued by international financial institutions to foreign companies/investors who want to invest in a domestic company in India. GDRs represent an ownership interest in the domestic company's shares and are traded on international stock exchanges, providing foreign investors with an easy and accessible way to invest in Indian companies.
Global Depositary Receipts (GDRs) are issued by international financial institutions to foreign companies/investors who want to invest in a domestic company in India. GDRs are financial instruments that represent an ownership interest in a company's shares. They are issued by international banks, typically in US dollars or other foreign currencies, and are traded on international stock exchanges.
Key Points:
- GDRs facilitate foreign investment in domestic companies by allowing investors to hold shares in the form of depository receipts.
- GDRs are denominated in foreign currency and are traded on international stock exchanges, making them easily accessible to foreign investors.
- GDRs are issued by international financial institutions, such as banks, and represent a specific number of shares in the domestic company.
- GDRs provide a way for foreign companies/investors to invest in Indian companies without the need to directly purchase and hold shares in the domestic company.
- GDRs can be listed on multiple international stock exchanges, which increases the liquidity and visibility of the domestic company's shares.
- GDR holders are entitled to receive dividends and capital gains from the underlying shares, and they can also convert their GDRs into the underlying shares if they choose to do so.
- GDRs offer foreign investors the opportunity to diversify their investment portfolios and gain exposure to the Indian market without the need for direct ownership of shares.
- GDRs also provide domestic companies with access to international capital markets and a broader investor base.
Conclusion:
In summary, Global Depositary Receipts (GDRs) are issued by international financial institutions to foreign companies/investors who want to invest in a domestic company in India. GDRs represent an ownership interest in the domestic company's shares and are traded on international stock exchanges, providing foreign investors with an easy and accessible way to invest in Indian companies.
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Which of the following is issued by an international financial institution to foreign companies/investors who wants to invest in a domestic company in India?a)Indian Depositary Receiptsb)Commercial Paperc)Global Depositary Receiptsd)Preference SharesCorrect answer is option 'C'. Can you explain this answer?
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Which of the following is issued by an international financial institution to foreign companies/investors who wants to invest in a domestic company in India?a)Indian Depositary Receiptsb)Commercial Paperc)Global Depositary Receiptsd)Preference SharesCorrect answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Which of the following is issued by an international financial institution to foreign companies/investors who wants to invest in a domestic company in India?a)Indian Depositary Receiptsb)Commercial Paperc)Global Depositary Receiptsd)Preference SharesCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is issued by an international financial institution to foreign companies/investors who wants to invest in a domestic company in India?a)Indian Depositary Receiptsb)Commercial Paperc)Global Depositary Receiptsd)Preference SharesCorrect answer is option 'C'. Can you explain this answer?.
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