American Depository Receipts (ADRs) are certificates issued by U.S. depository banks that represent shares of foreign companies. ADRs allow U.S. investors to invest in foreign companies without having to buy the actual shares on a foreign stock exchange.
When a foreign company decides to issue ADRs, it will typically hire a U.S. bank to manage the process. The U.S. bank will buy a large block of shares in the foreign company and then issue ADRs in the U.S. market. Each ADR typically represents a certain number of shares in the foreign company, although the exact ratio can vary.
ADRs are traded on U.S. stock exchanges, and investors can buy and sell them just like any other U.S. stock. ADRs provide investors with a convenient way to invest in foreign companies, without having to deal with the complexities of trading on foreign exchanges or currency conversions.
Infosys Limited (INFY), Tata Motors Limited (TTM), Wipro Limited (WIT), HDFC Bank Limited (HDB) & Dr. Reddy’s Laboratories Limited (RDY) are examples of Indian companies that have issued American Depository Receipts (ADRs) and are traded on U.S. stock exchanges.