Info system Ltd a reputed company in India want to tap the large amount of funds for its growth and expansion rom London for long term needs.
On the basis of above statement answer following questions.
Explain GDR as source of finance.
What is role of Europian Depository in GDR
What instrument will be used if Europian company wants to raise funds from Indian financial market.

Open in App

Solution

Dear student,
Global depository receipt are usually used by corporates or multinational companies as a source of finance for their company. They borrow money using this financial instrument in rupees or in foreign currency. The company issues their shares to a depository bank in local currency. The bank issues depository receipt in return for this. Such depository receipts converted to the value of foreign currency is known as GDR.
A European depository receipt is issued for shares of non European company which are traded in European financial markets.
Companies use GDR as a source of finance to borrow money in foreign currencies such as US dollars,Euro etc.. If the company tries to get borrowings in Euro instead of US dollars then in such situations GDR are termed as European depository receipt.
If a European company wants to raise funds from Indian financial market then they can make use of Indian depository receipts.
An Indian depository receipt is a financial instrument which has its value in terms of Indian rupees.It is issued to enable foreign companies to borrow money from Indian financial market.

Regards

Suggest Corrections

Similar questions

Q. 'Mission Coach Ltd.' is a large and creditworthy company manufacturing coaches for Indian Railways. It now wants to export these coaches to other countries and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves a huge flotation cost. To meet the expenses of the flotation cost, the company decides to tap the money market.
(a) Name and explain the money-market instrument the company can use for the above purpose.
(b) What is the duration for which the company can get funds through this instrument?
(c) State any other purpose for which this instrument can be used.

"Mission Coach" is a large creditworthy company manufacturing coaches for Indian Railways. It now wants to export these coaches to other countries and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expense of floatation cost, the company decides to tap the money market.

(i) Name and explain the money market instrument the company can use for the above purpose.

(ii) What is the duration for which the company can get funds through the instrument?

(iii) State any other purpose for which this instrument can be used.

Q. ' Rakesh Steel Lts.' is a large and creditworthy company manufacturing steel for the Indian market. It now wants to cater to the Asian market and decides to invest in new hi-tech machines. Since the investment is large, it requires long term finance. It decides to raise funds by issuing equity shares. the issue of equity shares involves huge flotation cost. To meet the expenses of flotation cost the company decides to tap the money market.

Name the money market instrument the company can use for the above purpose.

Sike Ltd., a reputed industrial machines manufacturer, needs rupees twenty crores as additional capital to expand the business. Mr. Amit Joshi, Chief Executive Officer (CEO) of the company, wants to raise funds through equity. The Finance Manager, Mr. Narinder Singh, suggested that the shares may be sold to the public through intermediaries, as the same will be less expensive. Name the method through which the company decided to raise additional capital.

Meca Ltd., a reputed automobile manufacturer needs rupees ten crores as additional capital to expand its business. Atul Jain, the CEO of the company wanted to raise funds through equity. On the other hand, the Finance Manager, Nimi Sadheve said that the public issue may be expensive on account of various mandatory and non-mandatory expenses. Therefore, it was decided to allot the securities to institutional investors. Name the method through which the company decided to raise additional capital.

Join BYJU'S Learning Program