Question

Read the passage given below and answer the questions that follow.

ABC Ltd. is a hardware manufacturing company listed on National Stock Exchange. The company operates only in Delhi-NCR. The management plans to expand their area of operation across the country. They require funds for their expansion plans.

1. Briefly explain the Global Depository Receipts source of finance.
2. State whether the Global Depository Receipts source can be used by ABC Ltd. or not for raising funds. Give a reason to support your answer.

Answer 1

1. Global Depository Receipts (GDRs) are financial instruments used by companies to raise capital from international markets. A GDR is a negotiable certificate issued by a depository bank, representing shares in a foreign company. These receipts are traded on international stock exchanges (such as in Europe or the US), and allow foreign investors to invest in the company without dealing with Indian market regulations directly.
2. No, ABC Ltd. cannot use GDRs for raising funds. GDRs can only be issued by companies listed on an international stock exchange. However, the passage states that ABC Ltd. is listed only on the National Stock Exchange (NSE) of India and operates only in the domestic (Delhi-NCR) region. Hence, it is not eligible to raise funds through GDRs.