What is an American Depository Receipt?

An American Depositary Receipt ("ADR") is a physical certificate evidencing ownership of American Depositary Shares ("ADSs"). The term is often used to refer to the ADSs themselves.

• Can companies in India raise foreign currency resources?

Yes. Indian companies are permitted to raise foreign currency resources through two main sources: 

1. issue of foreign currency convertible bonds more commonly known as ‘Euro’ issues and 
2. Issue of ordinary shares through depository receipts namely ‘Global Depository Receipts (GDRs)/American Depository Receipts (ADRs)’ to foreign investors i.e. to the institutional investors or individual investors.

What is an ADS?

An American Depositary Share ("ADS") is a U.S. dollar denominated form of equity ownership in a non-U.S. company. It represents the foreign shares of the company held on deposit by a custodian bank in the company's home country and carries the corporate and economic rights of the foreign shares, subject to the terms specified on the ADR certificate. One or several ADSs can be represented by a physical ADR certificate. The terms ADR and ADS are often used interchangeably. ADSs provide U.S. investors with a convenient way to invest in overseas securities and to trade non-U.S. securities in the U.S. ADSs are issued by a depository bank, such as JPMorgan Chase Bank. They are traded in the same manner as shares in U.S. companies, on the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX) or quoted on NASDAQ and the over-the-counter (OTC) market.

Although ADSs are U.S. dollar denominated securities and pay dividends in U.S. dollars, they do not eliminate the currency risk associated with an investment in a non-U.S. company.