CASE STUDY ON FCCB

While companies such as Uflex are cautiously treading the FCCB redemption path, those like Suzlon are confident of sailing through. The advantage it offers relative to other debt instruments like straight bond is that being a foreign currency instrument, it carries lower interest rates. The market capitalisation of Hotel Leela Venture has nosedived from around Rs 2, crore in to about Rs 1, crore today. With FCCBs, conversion to equity is only possible if certain conditions are met. You can change your cookie settings at any time but parts of our site will not function correctly without them. As a result, there will likely be a negative impact on the capital structure of the issuer companies.

INH hereinafter referred as ‘Equitymaster’ is an independent equity research Company. The Case Centre is a not-for-profit company limited by guarantee, registered in England No and entered in the Register of Charities No Please do not use this option on a public machine. FCCBs as an investment instrument are old, but nearly 70 per cent of the FCCBs currently held by Indian companies were issued only about five years ago – during the euphoria of the bull run. Later, the RBI further liberalised the scheme and allowed such buybacks under the automatic route.

As the name suggests, FCCBs are bonds issued in a foreign currency that give investors the option of converting them into shudy. The complexity of the product has grown over the years and now some of these issues make conversion mandatory if the share price goes well above the conversion price.

This stock of FCCBs ran into trouble as share prices fell sharply after the financial crisis of The performance data quoted represents past performance and does not guarantee future results.

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According to a Crisil report, bonds worth Rs 31, crore are coming up for redemption within the next 24 months. The promoters, including Captain C. If the sale goes through, RCOM hopes to use the money to reduce its mounting debt. The company garnered Rs.

case study on fccb

Comments are moderated by Equitymaster, in accordance with the Terms of Useand may not appear on this article until they have fcb reviewed and deemed appropriate for posting. Equitymaster is not an Investment Adviser. Click Here Delivery Details: Go to advanced search. The company also says it has received indicative offers from interested parties seeking to acquire RCOM’s controlling stake in Reliance Infratel, its telecom tower unit.

The Murphy’s law of foreign currency convertible bonds

INH hereinafter referred as ‘Equitymaster’ is an independent equity research Company. And, we will also tsudy at the implications for bondholders. With the euro crisis, and the market correction deeper than anticipated, companies are exploring other ways to raise funds.

However, it should serve as a reminder that complex products come with complex risks. This has restricted the use of the product over the past few years.

Product details

And, it also looks at the alternatives available to corporate India. Initially it was in the news as a great tool for raising funds for meeting company’s capex requirement.

The company had the option to redeem these bonds in whole not in part, at any time on or after October 25,but not less than seven business days prior to the maturity date i. Each bond would be converted into While companies such as Uflex are cautiously treading the FCCB redemption path, those like Suzlon are confident of sailing through.

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Finance, Accounting and Control.

case study on fccb

There have now been a number of cases where FCCB holders have dragged firms to court because of payment default. The money, says Deshika, will be casd for debt reduction and redemption. The thinking was that the since the FCCB crisis was brought on by external factors the global financial crisisregulatory intervention was justified and needed.

case study on fccb

Shares of Leela Venture are currently trading at around Rs 40 each. The 5 Minute Wrapup Profit Hunter. All fields Reference no. The coupon rates on these bonds are often lower because they offer investors the chance of benefiting from an upside in the equity of a company.

When FCCB turns ugly: Part I – Views on News from Equitymaster

Later, the RBI further liberalised the stydy and allowed such buybacks under the automatic route. They are also assured return in form of fixed coupon rate payments. Samsung has just launched a new sensor for ultra-high resolution mobile photography How to flash Android Q Beta Indians are searching ‘dating’ more than ‘matrimony’: Companies and investors would probably be best advised to stick to some of these less complex instruments.