And, we will also look at the implications for bondholders. ECBs might give companies some breathing room for now, but these borrowings could come at an interest rate of one to five per cent over the London Interbank Offered Rate – the world’s most widely used benchmark for shortterm interest rates. In , bondholders filed a winding-up petition against Zenith Infotech Ltd after the company failed to repay about crore. The Case Centre is dedicated to advancing the case method worldwide, sharing knowledge, wisdom and experience to inspire and transform business education across the globe. Prefer to pay in another currency?

The phone services firm is in a muddle, but analysts are still slightly more optimistic about the fund-raising abilities of big boys like RCOM, than the small and mid-size companies. And it is better than pure equity which immediately dilutes equity base. Some in the market are arguing that Sebi should intervene to protect the integrity of the market. However, it should serve as a reminder that complex products come with complex risks. But Thunuguntla, who has been tracking the company, says: Product details Share this page:

A conversion price is fixed at the time of the agreement. The debt-to-equity ratio will get more stretched.

case study on fccb

About Us The Equitymaster Way. Sales on the other hand came in at Rs 3 bn up There have now been a number of cases where FCCB holders have dragged firms to court because of payment default.

When the bonds mature, if the shares are trading above that price, bondholders can convert their bonds into equity. In the meantime, you may want to share this article with your friends! Since the Indian stock market is in bad shape, most of the bonds are up for redemption this year This article explains FCCBs and these developments. Information contained herein ccase not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers.


case study on fccb

And, it also looks at the alternatives available to corporate India. Prefer to pay in another currency? Nor is it a primary information source.

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

Chat with us Please leave your feedback. According to a Crisil report, bonds worth Rs 31, crore are coming up for redemption within the next 24 months. Two years back, many investors were selling FCCBs at low prices… we bought them back at a discount. This has restricted the use of the product over the past few years. Pay through PayPal Amount to be paid: These bonds were redeemable on the maturing date at This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement.

Google OnePlus 7 Pro price and specifications leaked: 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. In some cases, winding-up petitions have been filed. With FCCBs, conversion to equity is only possible if certain conditions are met.

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. Please do not use this option on a public machine. In24, crore was raised, after which issuances dwindled. The bonds were converted after shares went above a pre-fixed price 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.


Information herein should be regarded as a resource only and should be used at one’s own risk. The thinking was that the since the FCCB crisis was brought on by external factors the global financial crisisregulatory intervention studh justified and needed.

The Murphy’s law of foreign currency convertible bonds

The share price fell below the conversion price, and the company failed to pay the investors when it came up for redemption. The wind turbine maker has had the wind taken out of its sails.

case study on fccb

The biggest problem with FCCBs for bond issuers occurs when the share prices of the companies start heading south. The advantage it offers relative to other debt instruments like straight bond is that being a foreign currency instrument, it carries lower interest rates.

Tayal group, to court. Initially it was in the news as a great tool for raising funds for meeting company’s capex requirement.