Foreign currency convertible bonds and indian

When the Controller of Capital Issues CCI decided the premium at which a company could make a follow-on public issue FPOthe convertible bond was the instrument of choice. From the perspective of the Indian Government, this option potentially reduces the higher foreign exchange outflow.

Companies across sectors raised billions of dollars by issuing convertible bonds to investors.

Foreign Currency Convertible Bonds

Due to the equity side of the bond, which adds value, the coupon payments on the bond are lower for the issuer than a straight coupon bearing plain vanilla bond, thereby, reducing its debt-financing costs.

Presently, I am extensively working in the niche Corporate and Finance areas and had also been exposed to it, even as a student during my internships with corporate law firms.

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The bonds have been issued at a price of People are even talking about the possibility of defaults. However, the growth plans of companies were derailed due to the economic slowdown and stock prices of most FCCB issuers fell sharply post due to the global financial crisis as well as domestic factors.

Why is it important. Will the bonds be traded.

Foreign currency convertible bonds

Some corporate entities issue a type of bond known as convertible bonds. The court directed the company to repay its bond-holders first, prior to the secured creditors of the company.

Prior approval of the RBI is required to change the conversion price. The global economic crisis has slowed the revenue and profit growth of Indian companies, dragged down their stock prices and left them less able to service debt. The aforesaid circular[50] further lays down that these foreign currency convertible bonds are required to be issued in accordance with the scheme viz.

The borrowing firms were saddled with large foreign currency loans they were badly placed to repay. Volume 1 [10] A Put Option gives the bondholder the right but not an obligation to sell a fixed number of equity shares of a company at a specified price at any time on or before the maturity date.

Foreign Currency Convertible Bond - FCCB

And, given the state of the rupee, foreign assets may be the first to go. If the shares drop to levels much below the conversion price, it may cause heartburn to the bondholders. For Further Details Contact: The author can be reached at: The convertible bond has always been a favorite of corporate India.

If the aforesaid shares are held by the non-resident investor for a period of more than twelve months from the date of advice of their redemption by the Overseas Depositary Bank, the capital gains arising on the sale thereof will be treated as long-term capital gains and will be subject to income-tax at the rate of 10 per cent under the provisions of section AC of the Income-tax Act.

If a company has a reasonably healthy balance sheet and a good track record, it will be able to raise the money. In view of the above, monies raised by the FCCB issues, amounting to foreign investments in India, prove to be a boon as they are affirmatively utilized for corporate development and expansion plans.

Investors are hedge -fund arbitrators or foreign nationals. A couple of years ago, several issuers were staring at defaults and seeking regulatory permission to reset the conversion price after their stocks dropped to a lower level than the issue price.

(ii) Foreign Currency Convertible Bonds (FCCBs): FCCBs mean a bond issued by an Indian company expressed in foreign currency, and the principal and interest in respect of which is payable in foreign currency.

A Triple Whammy for Indian Foreign Exchange Bond Issuers

The bonds are required to be issued in accordance with the scheme viz., "Issue of Foreign Currency Convertible Bonds. FCCB - Meaning Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, FCCB means a bond issued in accordance with this scheme &.

Foreign currency convertible bonds and foreign currency exchangeable bonds—overview Produced in partnership with Kocchar & Co Borrowers may raise external commercial borrowings under Track I by issuing Foreign Currency Convertible Bonds (FCCBs) and/or Foreign Currency Exchangeable Bonds (FCEBs).

MUMBAI: Several Indian companies with outstanding foreign currency convertible bonds (FCCBs) can breathe easy now as their share prices are quoting at a premium to the conversion price.

With their stocks trading above the conversion price, many companies have been either repaying their outstanding. Foreign currency convertible bonds (FCCBs) are back in the headlines, and once again it’s for all the wrong reasons.

As the name suggests, FCCBs are bonds issued in a foreign currency that give. Nov 26,  · Following the sustained liberalisation programme undertaken by the Indian Government to integrate with the global economy, the foreign currency convertible bond (FCCB) market took a quantum leap during the bull run of –

Foreign currency convertible bonds and indian
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Foreign Currency Convertible Bonds Issued By Indian Companies - Corporate/Commercial Law - India