Indian Depository Receipt (IDR) is a financial instrument that allows foreign companies to raise funds and trade their equity shares in India without being directly listed on Indian stock exchanges. It provides Indian investors an opportunity to invest in shares of overseas companies within the domestic regulatory framework.

Definition and Structure:
An IDR is a depository receipt denominated in Indian Rupees and issued by a domestic depository (such as a bank) against the underlying equity shares of a foreign company. The actual shares are held by an overseas custodian bank, while Indian investors hold the IDRs, which represent ownership in those shares.

Example:
If a foreign company like XYZ Ltd., based in the UK, wishes to tap the Indian capital market, it can issue IDRs through an Indian depository. Investors in India can then purchase these IDRs on Indian stock exchanges, just like they would trade domestic shares.

Key Features:

• Denomination: Issued and traded in Indian Rupees.
• Listing: Listed on Indian stock exchanges such as the NSE or BSE.
• Regulation: Governed by the Securities and Exchange Board of India (SEBI) and the Companies Act, 2013.
• Dividends: Investors receive dividends in Indian Rupees after conversion from the foreign currency.

Benefits:
For foreign companies, IDRs provide access to a large pool of Indian investors and enhanced brand visibility in India. For investors, they offer a chance to diversify portfolios internationally without dealing with foreign exchange regulations or overseas trading accounts.

Conclusion:
The Indian Depository Receipt (IDR) serves as a bridge between global corporations and Indian investors. It promotes cross-border investment while maintaining transparency and compliance with Indian market regulations, thereby strengthening Indiaís integration with the global financial ecosystem.