Foreign currency convertible bonds and indian

Enforcement of bond-holders' rights In the event of a dispute between an Indian company and its bond-holders in respect of redemption of FCCBs, the bond-holder may seek recourse to the contractual dispute resolution mechanism prescribed in the FCCB transaction documents — typically arbitration.

If such shares are held for a period of less than twelve months from the date of redemption advice, the capital gains arising on the sale thereof will be treated as short-term capital gains and will be subject to tax at the normal rates of income-tax applicable to non-residents under the provisions of the Income-tax Act.

Pricing and Maturity - 1 The rate of interest payable on Foreign Currency Exchangeable Bond and the issue expenses incurred in foreign currency shall be within the all in cost ceiling as specified by Reserve Bank of India under the External Commercial Borrowings policy.

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.

Reports estimate that approximately half of the FCCBs due to mature in the second half of will need to be restructured, as it will prove difficult for companies to refinance the FCCBs in the current debt market.

The price of the ordinary shares of the issuing company prevailing in the Bombay Stock Exchange or the National Stock Exchange on the date of the advice of redemption shall be taken as the cost of acquisition of the underlying ordinary shares.

Considering the present credit crunch and high interest rates, raising new domestic debt to service cheaper FCCB debt may prove expensive and unfeasible.

Foreign Currency Convertible Bonds

The FCCBs of a dozen companies are set to mature next year. Alternatively, send us an email using the feedback icon in the toolbar below.

While exercising the exchange option, the holder of the Foreign Currency Exchangeable Bond shall take delivery of the offered shares. Further, the present shareholders may not agree to dilute their equity by inducting new shareholders.

Most recently, Jaiprakash Power Ventures Ltd had to reschedule payments on its FCCBs and extend the maturity date by a year since the stock price was below the conversion price and the group was finding it difficult to meet redemptions immediately.

Refinancing entails settlement of debt by the issuer and mandates funds at the disposal of the issuer company to redeem the bonds. Hence, the FCCBs have yet again proved to be an economic-financial rescue means by propping up the budget airline especially as the markets sloth adds to its undesirable and downbeat performance.

Also, there is no systemic risk here.

The Murphy’s law of foreign currency convertible bonds

Document currently unavailable Please try again later. Under IFRS provisions, a company must mark-to-market the amount of its outstanding bonds.

All you wanted to know about...FCCBs

Investors are hedge -fund arbitrators or foreign nationals. This may not be feasible in the current market. The price and the yield on the bond moves on the opposite direction.

Foreign currency convertible bonds

Therefore bond is generally a long-term debt security. They filed a petition seeking to wind up the affairs of the company so that they could be repaid. This has restricted the use of the product over the past few years. Foreign currency convertible bonds and foreign currency exchangeable bonds—overview Your document is being created.

Despite the bright prospects, the Indian stock markets have been known for severe manipulations and it is suspected that the recent boom has come in handy for several unscrupulous elements to take advantage of such market gyrations.

Foreign Currency Convertible Bonds— Legal Parameters vis-à-vis the Economic Trends

The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence by the investor on the management of the enterprise. The promoter group company receiving such investments will not be permitted to utilize the proceeds for investments in the capital market or in real estate in India.

In some cases, winding-up petitions have been filed. Specialist advice should be sought about your specific circumstances.

The exchange option can be exercised at any time before redemption. 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.

The Mumbai-based company is not alone. The Global Depositary Receipts issued under this Scheme may be listed on any of the Overseas Stock Exchanges, or over the counter exchanges or through Book Entry Transfer Systems prevalent abroad and such receipts may be purchased, possessed and freely transferable by a person who is a non-resident within the meaning of section 2 q of the Foreign Exchange Regulation Act, 46 ofsubject to the provisions of that Act.

(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.

The bonds are required to be issued in accordance with the scheme viz., "Issue of Foreign Currency Convertible Bonds. “Foreign Currency Exchangeable Bond” means a bond expressed in foreign currency, the principal and interest in respect of which is payable in foreign currency, issued by an Issuing Company and subscribed to by a person who is a resident outside India, in foreign currency and exchangeable into equity share of another company, to be.

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“Foreign Currency Exchangeable Bond” means a bond expressed in foreign currency, the principal and interest in respect of which is payable in foreign currency, issued by an Issuing Company and subscribed to by a person who is a resident outside India, in foreign currency and exchangeable into equity share of another company, to be called.

Last week, foreign currency convertible bonds (FCCBs) issued by Castex Technologies made headlines after the company compulsorily converted them into shares and earned the ire of foreign investors.

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 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).

Foreign currency convertible bonds and indian
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