Mergers & Acquisitions

ECB & FCCB PRESENTATION ON :

Presented By : Apurv Gourav BA – 0712 Parikshit Gupta BA – 0731 Saurabh Dwivedi BA – 0745

Apurv Gourav BA – 0712

Parikshit Gupta BA – 0731

Saurabh Dwivedi BA – 0745

External Commercial Borrowing

External

Commercial

Borrowing

ECB A source of funds for financing expansion of existing capacity and for fresh investment out of territory External Commercial Borrowings (ECB) refer to commercial loans availed from non-resident lenders

A source of funds for financing expansion of existing capacity and for fresh investment out of territory

External Commercial Borrowings (ECB) refer to commercial loans availed from non-resident lenders

ECB includes: commercial bank loans buyer’s credit supplier’s credit securitized instruments such as floating rate notes fixed rate bonds credit from official export credit agencies,

commercial bank loans

buyer’s credit

supplier’s credit

securitized instruments such as floating rate notes

fixed rate bonds

credit from official export credit agencies,

ECB includes: Commercial borrowings from the private sector Window of multilateral financial institutions such as IFC, ADB, AFIC, CDC etc. Investment by Foreign Institutional Investors (FIIs) in dedicated debt funds

Commercial borrowings from the private sector

Window of multilateral financial institutions such as IFC, ADB, AFIC, CDC etc.

Investment by Foreign Institutional Investors (FIIs) in dedicated debt funds

Why ECB Scarcity of fund in domestic market Cheaper than domestic debts

Scarcity of fund in domestic market

Cheaper than domestic debts

Regulation Clause (d) of sub-section 3 of section 6 of the Foreign Exchange Management Act, 1999 (FEMA) With section 6 of Notification No. FEMA 3 / 2000-RB dated May 3, 2000 (amended)

Clause (d) of sub-section 3 of section 6 of the Foreign Exchange Management Act, 1999 (FEMA)

With section 6 of Notification No. FEMA 3 / 2000-RB dated May 3, 2000 (amended)

Policy Permitted by the Government as a source of finance for Corporate to expand their existing capacity & for fresh investment An annual cap or ceiling on access to ECB, consistent with prudent debt management Greater priority for projects in the infrastructure, Power, oil, telecom, railways, Roads & Bridges, Ports, Industrial parks, urban Infrastructure & export sector.

Permitted by the Government as a source of finance for Corporate to expand their existing capacity & for fresh investment

An annual cap or ceiling on access to ECB, consistent with prudent debt management

Greater priority for projects in the infrastructure, Power, oil, telecom, railways, Roads & Bridges, Ports, Industrial parks, urban Infrastructure & export sector.

Ways of raising ECB Automatic route Approval route

Automatic route

Approval route

Automatic Route ECB for investment in real sector -industrial sector, especially infrastructure sector-in India, are under Automatic Route, i.e. do not require RBI permission Government approval. In case of doubt as regards eligibility to access Automatic Route, applicants may take recourse to the Approval Route.

ECB for investment in real sector -industrial sector, especially infrastructure sector-in India, are under Automatic Route, i.e. do not require RBI permission

Government approval. In case of doubt as regards eligibility to access

Automatic Route, applicants may take recourse to the Approval Route.

Eligible Borrowers Corporate (registered under the Companies Act except financial intermediaries) Units in Special Economic Zones (SEZ) are allowed to raise ECB for their own requirement. Individuals, Trusts and Non-Profit making organizations are not eligible to raise ECB.

Corporate (registered under the Companies Act except financial intermediaries)

Units in Special Economic Zones (SEZ) are allowed to raise ECB for their own requirement.

Individuals, Trusts and Non-Profit making organizations are not eligible to raise ECB.

Recognized Lenders International banks International capital markets Multilateral financial institutions (IFC, ADB, CDC) Export credit agencies Suppliers of equipment Foreign collaborators Foreign equity holders

International banks

International capital markets

Multilateral financial institutions (IFC, ADB, CDC)

Export credit agencies

Suppliers of equipment

Foreign collaborators

Foreign equity holders

Condition for Foreign Equity Holders For ECB up to $ 5 m - minimum equity of 25% held directly by the lender For ECB more than $ 5 m - minimum equity of 25% held directly by the lender & debt-equity ratio not exceed 4:1 (The proposed ECB not exceeding four times the direct foreign equity holding).

For ECB up to $ 5 m - minimum equity of 25% held directly by the lender

For ECB more than $ 5 m - minimum equity of 25% held directly by the lender & debt-equity ratio not exceed 4:1

(The proposed ECB not exceeding four times the direct foreign equity holding).

Amount & Maturity Maximum ECB which can be raised is $ 500 m or equivalent during a financial year. ECB up to $ 20 m or equivalent in a financial year with minimum average maturity of three years . ECB above $ 20 m and up to USD 500 million or equivalent with a minimum average maturity of five years.

Maximum ECB which can be raised is $ 500 m or equivalent during a financial year.

ECB up to $ 20 m or equivalent in a financial year with minimum average maturity of three years .

ECB above $ 20 m and up to USD 500 million or equivalent with a minimum average maturity of five years.

Utilization Import of capital goods (as classified by DGFT in the Foreign Trade Policy), by new or existing production units, in real sector - industrial sector SME and infrastructure sector Power, Telecommunication, Railways, road including bridges, sea port and airport, industrial parks, urban infrastructure (water supply, sanitation and sewage projects) Overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS)

Import of capital goods (as classified by DGFT in the Foreign Trade Policy), by new or existing production units, in real sector - industrial sector SME and infrastructure sector

Power, Telecommunication, Railways, road including bridges, sea port and airport, industrial parks, urban infrastructure (water supply, sanitation and sewage projects)

Overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS)

Restricted Areas Utilization of ECB is not permitted for on-lending or investment in capital market or acquiring a company (or a part thereof) in India by a corporate Utilization of ECB is not permitted in real estate Utilization of ECB is not permitted for working capital, general corporate purpose and repayment of existing Rupee loans.

Utilization of ECB is not permitted for on-lending or investment in capital market or acquiring a company (or a part thereof) in India by a corporate

Utilization of ECB is not permitted in real estate

Utilization of ECB is not permitted for working capital, general corporate purpose and repayment of existing Rupee loans.

Parking of ECB Deposits or Certificate of Deposit or other products offered by banks Deposits with overseas branch of an authorized dealer in India Treasury bills and other monetary instruments of one year maturity Rating of above institution – AA (-) by S&P/Fitch IBCA or Aa3 by Moody’s The funds should be invested in such a way that the investments can be liquidated as and when funds are required by the borrower in India.

Deposits or Certificate of Deposit or other products offered by banks

Deposits with overseas branch of an authorized dealer in India

Treasury bills and other monetary instruments of one year maturity

Rating of above institution – AA (-) by S&P/Fitch IBCA or Aa3 by Moody’s

The funds should be invested in such a way that the investments can be liquidated as and when funds are required by the borrower in India.

Prepayment Prepayment of ECB up to $ 500 m is allowed without prior approval of RBI Minimum average maturity period is applicable to the loan.

Prepayment of ECB up to $ 500 m is allowed without prior approval of RBI

Minimum average maturity period is applicable to the loan.

Refinancing The fresh ECB is raised at a lower cost than the existing Maturity of the original ECB is maintained.

The fresh ECB is raised at a lower cost than the existing

Maturity of the original ECB is maintained.

Procedure No prior approval of RBI is required The borrower must obtain a Loan Registration Number (LRN) from RBI before drawing down the ECB. The procedure for obtaining LRN is detailed in para II (i) (b). of FEMA

No prior approval of RBI is required

The borrower must obtain a Loan Registration Number (LRN) from RBI before drawing down the ECB.

The procedure for obtaining LRN is detailed in para II (i) (b). of FEMA

Approval Route

Approval

Route

FI’s dealing exclusively with infrastructure or export finance such as IDFC, IL&FS, Power Finance Corporation, Power Trading Corporation, IRCON and EXIM Bank are considered on a case by case basis. Banks & FI’s which had participated in the textile or steel sector restructuring package as approved by the Government are permitted to the extent of their investment in the package and assessment by Reserve Bank based on prudential norms. Any ECB availed for this purpose so far will be deducted from their entitlement. Eligible Borrowers

FI’s dealing exclusively with infrastructure or export finance such as IDFC, IL&FS, Power Finance Corporation, Power Trading Corporation, IRCON and EXIM Bank are considered on a case by case basis.

Banks & FI’s which had participated in the textile or steel sector restructuring package as approved by the Government are permitted to the extent of their investment in the package and assessment by Reserve Bank based on prudential norms. Any ECB availed for this purpose so far will be deducted from their entitlement.

Eligible Borrowers ECB with minimum average maturity of 5 years by NBFCs from multilateral financial institutions reputable regional financial institutions, official export credit agencies and international banks to finance import of infrastructure equipment for leasing to infrastructure projects. Corporate in services sector viz. hotels, hospitals and software companies can avail ECB for import of capital goods

ECB with minimum average maturity of 5 years by NBFCs from multilateral financial institutions reputable regional financial institutions, official export credit agencies and international banks to finance import of infrastructure equipment for leasing to infrastructure projects.

Corporate in services sector viz. hotels, hospitals and software companies can avail ECB for import of capital goods

Eligible Borrowers Special Purpose Vehicles, or any other entity notified by the Reserve Bank, set up to finance infrastructure companies / projects exclusively, will be treated as Financial Institutions and ECB by such entities will be considered under the Approval Route. Multi-State Co-operative Societies engaged in manufacturing activity satisfying the following criteria i) the Co-operative Society is financially solvent and ii) the Co-operative Society submits its up-to-date audited balance sheet. Corporate engaged in industrial sector and infrastructure sector in India can avail ECB for Rupee expenditure for permissible end-uses.

Special Purpose Vehicles, or any other entity notified by the Reserve Bank, set up to finance infrastructure companies / projects exclusively, will be treated as Financial Institutions and ECB by such entities will be considered under the Approval Route.

Multi-State Co-operative Societies engaged in manufacturing activity satisfying the following criteria

i) the Co-operative Society is financially solvent and

ii) the Co-operative Society submits its up-to-date audited balance sheet.

Corporate engaged in industrial sector and infrastructure sector in India can avail ECB for Rupee expenditure for permissible end-uses.

Eligible Borrowers Foreign Currency Convertible Bonds (FCCBs) by housing finance companies satisfying the following minimum criteria: (i) the minimum net worth of the financial intermediary during the previous three years shall not be less than Rs. 500 crore, (ii) a listing on the BSE or NSE, (iii) minimum size of FCCB is USD 100 million, (iv) the applicant should submit the purpose / plan of utilization of funds.

Foreign Currency Convertible Bonds (FCCBs) by housing finance companies satisfying the following minimum criteria:

(i) the minimum net worth of the financial intermediary during the previous three years shall not be less than Rs. 500 crore,

(ii) a listing on the BSE or NSE,

(iii) minimum size of FCCB is USD 100 million,

(iv) the applicant should submit the purpose / plan of utilization of funds.

Eligible Borrowers NGOs engaged in micro finance activities are eligible to avail ECB for Rupee expenditure for permissible end-uses. The maximum limit for NGOs are $ 5 m. Such NGO (i) should have a satisfactory borrowing relationship for at least 3 years with a scheduled commercial bank authorized to deal in foreign exchange (ii) Would require a certificate of due diligence on `fit and proper’ status of the board/committee of management of the borrowing entity from the designated Authorized Dealer bank.

NGOs engaged in micro finance activities are eligible to avail ECB for Rupee expenditure for permissible end-uses. The maximum limit for NGOs are $ 5 m.

Such NGO

(i) should have a satisfactory borrowing relationship for at least 3 years with a scheduled commercial bank authorized to deal in foreign exchange

(ii) Would require a certificate of due diligence on `fit and proper’ status of the board/committee of management of the borrowing entity from the designated Authorized Dealer bank.

Recognized Lenders ECB’s can be raise from international sources such as (i) international banks (ii) international capital markets (iii) multilateral financial institutions (such as IFC, ADB, CDC (iv) export credit agencies (v) suppliers' of equipment (vi) foreign collaborators (vii)Foreign equity holders

ECB’s can be raise from international sources such as

(i) international banks

(ii) international capital markets

(iii) multilateral financial institutions (such as IFC, ADB, CDC

(iv) export credit agencies

(v) suppliers' of equipment

(vi) foreign collaborators

(vii)Foreign equity holders

Condition for Foreign Equity Holders The minimum equity held directly by the foreign equity lender is 25 % but debt-equity ratio exceeds 4:1 (The proposed ECB not exceeding four times the direct foreign equity holding).

The minimum equity held directly by the foreign equity lender is 25 % but debt-equity ratio exceeds 4:1

(The proposed ECB not exceeding four times the direct foreign equity holding).

Borrowing from Overseas Organizations Overseas Organizations proposing to lend ECB would have to furnish a certificate of due diligence from an overseas bank which in turn is subject to regulation of host-country regulator and adheres to Financial Action Task Force (FATF) guidelines to the AD bank of the borrower. certificate should contain (i) The lender maintains an account with the bank for at least a period of two years (ii) The lending entity is organized as per the local law and held in good esteem by the business/local community and (iii) that there is no criminal action pending against it.

Overseas Organizations proposing to lend ECB would have to furnish a certificate of due diligence from an overseas bank which in turn is subject to regulation of host-country regulator and adheres to Financial Action Task Force (FATF) guidelines to the AD bank of the borrower. certificate should contain

(i) The lender maintains an account with the bank for at least a period of two years

(ii) The lending entity is organized as per the local law and held in good esteem by the business/local community and (iii) that there is no criminal action pending against it.

Amount & Maturity Maximum ECB which can be raised is $ 500 m or equivalent during a financial year. ECB up to $ 20 m or equivalent in a financial year with minimum average maturity of three years . ECB above $ 20 m and up to USD 500 million or equivalent with a minimum average maturity of five years.

Maximum ECB which can be raised is $ 500 m or equivalent during a financial year.

ECB up to $ 20 m or equivalent in a financial year with minimum average maturity of three years .

ECB above $ 20 m and up to USD 500 million or equivalent with a minimum average maturity of five years.

Apart from above automatic route norms: Additional amount of $ 250 m with average maturity of more than 10 years under the approval route Corporate in infrastructure sector can avail ECB up to $ 100 m Corporate in industrial sector can avail ECB up to $50 m Corporates in the services sector i.e. hotels, hospitals and software companies can avail ECB up to $100 m Amount & Maturity

Apart from above automatic route norms:

Additional amount of $ 250 m with average maturity of more than 10 years under the approval route

Corporate in infrastructure sector can avail ECB up to $ 100 m

Corporate in industrial sector can avail ECB up to $50 m

Corporates in the services sector i.e. hotels, hospitals and software companies can avail ECB up to $100 m

Utilization Power, Telecommunication, Railways, road including bridges, sea port and airport, industrial parks, urban infrastructure (water supply, sanitation and sewage projects) Overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) Import of capital goods by corporate in the service sector, viz., hotels, hospitals and software companies.

Power, Telecommunication, Railways, road including bridges, sea port and airport, industrial parks, urban infrastructure (water supply, sanitation and sewage projects)

Overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS)

Import of capital goods by corporate in the service sector, viz., hotels, hospitals and software companies.

Restricted Areas On-lending or investment in capital market or acquiring a company Real estate For working capital, general corporate purpose and repayment of existing Rupee loans.

On-lending or investment in capital market or acquiring a company

Real estate

For working capital, general corporate purpose and repayment of existing Rupee loans.

Parking of ECB Deposits or Certificate of Deposit or other products offered by banks Deposits with overseas branch of an authorized dealer in India Treasury bills and other monetary instruments of one year maturity Rating of above institution – AA (-) by S&P/Fitch IBCA or Aa3 by Moody’s The funds should be invested in such a way that the investments can be liquidated as and when funds are required by the borrower in India.

Deposits or Certificate of Deposit or other products offered by banks

Deposits with overseas branch of an authorized dealer in India

Treasury bills and other monetary instruments of one year maturity

Rating of above institution – AA (-) by S&P/Fitch IBCA or Aa3 by Moody’s

The funds should be invested in such a way that the investments can be liquidated as and when funds are required by the borrower in India.

Prepayment Prepayment of ECB up to $ 500 m is allowed without prior approval of RBI Pre-payment of ECB for amounts exceeding $ 500 m would be considered by the Reserve Bank under the Approval Route. (Minimum average maturity period is applicable to the loan.)

Prepayment of ECB up to $ 500 m is allowed without prior approval of RBI

Pre-payment of ECB for amounts exceeding $ 500 m would be considered by the Reserve Bank under the Approval Route.

(Minimum average maturity period is applicable to the loan.)

Refinancing The fresh ECB is raised at a lower cost than the existing Maturity of the original ECB is maintained.

The fresh ECB is raised at a lower cost than the existing

Maturity of the original ECB is maintained.

Procedure No prior approval of RBI is required The borrower must obtain a Loan Registration Number (LRN) from RBI before drawing down the ECB. The procedure for obtaining LRN is detailed in para II (i) (b). of FEMA

No prior approval of RBI is required

The borrower must obtain a Loan Registration Number (LRN) from RBI before drawing down the ECB.

The procedure for obtaining LRN is detailed in para II (i) (b). of FEMA

All-in-cost ceilings Expenses paid in foreign Currency Interest Other fees & expenses Expenses paid in Indian Currency Commitment fee Pre-payment fee (The payment of withholding tax in Indian Rupees is excluded for calculating the all-in-cost.)

Expenses paid in foreign Currency

Interest

Other fees & expenses

Expenses paid in Indian Currency

Commitment fee

Pre-payment fee

(The payment of withholding tax in Indian Rupees is excluded for calculating the all-in-cost.)

Expense Ceiling Average Maturity Period All-in-cost Ceiling over 6 month LIBOR* Three years and up to five years 200 basis points More than five years 350 basis points

Empowered Committee A committee established to accept the proposal scrutiny it and forward application to RBI for permission for Approval route ECB

A committee established to accept the proposal scrutiny it and forward application to RBI for permission for Approval route ECB

Compliances with ECB Guidelines Contravention of the ECB guidelines will be viewed seriously Penal action will be taken under FEMA 1999 (cf. A. P. (DIR Series) Circular No. 31 dated February 1, 2005) The designated AD bank is required to ensure that raising / utilization of ECB is in compliance with ECB guidelines at the time of certification.

Contravention of the ECB guidelines will be viewed seriously

Penal action will be taken under FEMA 1999 (cf. A. P. (DIR Series) Circular No. 31 dated February 1, 2005)

The designated AD bank is required to ensure that raising / utilization of ECB is in compliance with ECB guidelines at the time of certification.

Conversion of ECB into Equity The activity of the company is covered under the Automatic Route for Foreign Direct Investment or Government approval for foreign equity participation has been obtained by the company, The foreign equity holding after such conversion of debt into equity is within the sectoral cap, if any, Pricing of shares is as per SEBI and erstwhile CCI guidelines/regulations in the case of listed/unlisted companies as the case may be.

The activity of the company is covered under the Automatic Route for Foreign Direct Investment or Government approval for foreign equity participation has been obtained by the company,

The foreign equity holding after such conversion of debt into equity is within the sectoral cap, if any,

Pricing of shares is as per SEBI and erstwhile CCI guidelines/regulations in the case of listed/unlisted companies as the case may be.

$ 5 Million Scheme AD banks are permitted to approve elongation of repayment period for loans raised under the $ 5 m Scheme , provided The overseas lender has given letter for such reschedulement without any additional cost. Such approval with existing and revised repayment schedule along with the Loan Key/Loan Registration Number should be initially communicated to the Chief General Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India, Central Office, ECB Division, Mumbai within seven days of approval and subsequently in ECB - 2.

AD banks are permitted to approve elongation of repayment period for loans raised under the

$ 5 m Scheme , provided

The overseas lender has given letter for such reschedulement without any additional cost.

Such approval with existing and revised repayment schedule along with the Loan Key/Loan Registration Number should be initially communicated to the Chief General Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India, Central Office, ECB Division, Mumbai within seven days of approval and subsequently in ECB - 2.

Application The complete application should be submitted by the applicant through the designated authorized dealer to the Chief General Manager-In-Charge, Foreign Exchange Department, Central Office, ECB Division, Reserve Bank of India, Mumbai 400 001.

The complete application should be

submitted by the applicant through

the designated authorized dealer to the

Chief General Manager-In-Charge, Foreign Exchange Department, Central Office, ECB Division, Reserve Bank of India, Mumbai 400 001.

Documentation (i) A copy of offer letter from the overseas lender/supplier furnishing complete details of the terms and conditions of proposed ECB. (ii) A copy of the import contract, proforma/commercial invoice/bill of lading.

(i) A copy of offer letter from the overseas lender/supplier furnishing complete details of the terms and conditions of proposed ECB.

(ii) A copy of the import contract, proforma/commercial invoice/bill of lading.

Year ECB Inflows $ (mn approx) 2001-02 2652.64 2002-03 4234.96 2003-04 8175.50

Inflow of ECB

Month (2008) ECB Inflows $ (mn approx) May 0995.67 June 1446.08 July 2461.82 August 0897.59 September 2834.95 October 1125.23 SOURCE-RBI

Foreign Currency Convertible Bond

Foreign Currency Convertible Bond

FCCB Foreign Currency Convertible Bonds (FCCB) are debt instruments issued in a currency different than the issuer’s domestic currency with an option to convert them in common shares of the issuer company.

Foreign Currency Convertible Bonds (FCCB) are debt instruments issued in a currency different than the issuer’s domestic currency with an option to convert them in common shares of the issuer company.

Features of FCCB A debt instrument which can be converted into a company’s equity shares if the investor chooses to do so, at a pre-determined strike rate. FCCB issues have a ‘Call’ and ‘Put’ option to suit the structure of the bond, both the options are subject to RBI guidelines. The interest on FCCBs is generally 30% -40% less than on normal debt paper or foreign currency loans or ECBs. This translates to cost saving of approx 2-3 percent p.a.

A debt instrument which can be converted into a company’s equity shares if the investor chooses to do so, at a pre-determined strike rate.

FCCB issues have a ‘Call’ and ‘Put’ option to suit the structure of the bond, both the options are subject to RBI guidelines.

The interest on FCCBs is generally 30% -40% less than on normal debt paper or foreign currency loans or ECBs. This translates to cost saving of approx 2-3 percent p.a.

Features of FCCB FCCB can be secured as well as unsecured. Most of the FCCB issued by Indian Companies are generally unsecured. FCCB can be converted into Indian Shares or American Depository Receipts (ADR) FCCB are generally listed to improve liquidity, generally Indian issuer have listed at Singapore Stock Exchange and in many cases also on Luxembourg Stock Exchange.

FCCB can be secured as well as unsecured. Most of the FCCB issued by Indian Companies are generally unsecured.

FCCB can be converted into Indian Shares or American Depository Receipts (ADR)

FCCB are generally listed to improve liquidity, generally Indian issuer have listed at Singapore Stock Exchange and in many cases also on Luxembourg Stock Exchange.

Statutory Guideline & RBI Regulation FCCB can be raised by two ways : Automatic Route Approval Route

FCCB can be raised by two ways :

Automatic Route

Approval Route

Automatic Route The automatic route is available to real sector i.e. Industrial sector, specially infrastructure sector-in India

The automatic route is available to real sector i.e. Industrial sector, specially infrastructure sector-in India

Approval Route Financial Institutions dealing exclusively with infrastructure or export finance such as IDFC, IL&FS, Power Finance Corporation, Power Trading Corporation, IRCON and EXIM Bank Banks and financial institutions which had participated in the textile or steel sector restructuring package as approved by the Government are also permitted to the extent of their investment in the package and assessment by RBI based on prudential norms. Any ECB availed for this purpose so far are deducted from their entitlement.

Financial Institutions dealing exclusively with infrastructure or export finance such as IDFC, IL&FS, Power Finance Corporation, Power Trading Corporation, IRCON and EXIM Bank

Banks and financial institutions which had participated in the textile or steel sector restructuring package as approved by the Government are also permitted to the extent of their investment in the package and assessment by RBI based on prudential norms. Any ECB availed for this purpose so far are deducted from their entitlement.

Regulations Minimum Average Maturity shall be 3 years for borrowing up to $ 20 m and 5 years in case it exceeds $ 20 m The maximum amount of ECB to be raised in a financial year can be $ 500 m

Minimum Average Maturity shall be 3 years for borrowing up to $ 20 m and 5 years in case it exceeds $ 20 m

The maximum amount of ECB to be raised in a financial year can be $ 500 m

Utilization (a) Investment purposes like Import of Capital goods, New projects, modernization/expansion programs in Industrial and infrastructure sector (b) Overseas direct investment in JV or wholly owned subsidiaries abroad (c) RBI guidelines provide that funds received through FCCB should be parked abroad till the actual requirement arises in India.

(a) Investment purposes like Import of Capital goods, New projects, modernization/expansion programs in Industrial and infrastructure sector

(b) Overseas direct investment in JV or wholly owned subsidiaries abroad

(c) RBI guidelines provide that funds received through FCCB should be parked abroad till the actual requirement arises in India.

Ministry of Finance Guideline for Listed Companies Eligibility of Issuer – Only Companies who are allowed to raise capital from Indian market Eligibility of Subscriber – Overseas Corporate Bodies (OCBs) who are eligible to invest in India through the portfolio route and entities allowed to buy, sell or deal in securities by SEBI

Eligibility of Issuer – Only Companies who are allowed to raise capital from Indian market

Eligibility of Subscriber – Overseas Corporate Bodies (OCBs) who are eligible to invest in India through the portfolio route and entities allowed to buy, sell or deal in securities by SEBI

Pricing of FCCB The pricing should be made at a price not less than the higher of the following two averages: (i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date; (ii) The average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange during the two weeks preceding the relevant date.

The pricing should be made at a price not less than the higher of the following two averages:

(i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date;

(ii) The average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange during the two weeks preceding the relevant date.

Buy Back of FCCB The buyback value of the FCCB shall be at a minimum discount of 25% on the book value The funds used for the buyback shall be out of internal accruals, to be evidenced by Statutory Auditor and designated AD Category – I bank's certificate The total amount of buyback shall not exceed USD 50 million of the redemption value, per company.

The buyback value of the FCCB shall be at a minimum discount of 25% on the book value

The funds used for the buyback shall be out of internal accruals, to be evidenced by Statutory Auditor and designated AD Category – I bank's certificate

The total amount of buyback shall not exceed USD 50 million of the redemption value, per company.

Issuance of FCCB By Indian Companies FCCBs can be issued by Indian companies in the overseas market in accordance with Scheme for Issue of FCCB & Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993. The FCCB issue needs to conform to External Commercial Borrowing guidelines, issued by RBI vide Notification No. FEMA 3/2000-RB dated May 3, 2000 as amended from time to time.

FCCBs can be issued by Indian companies in the overseas market in accordance with Scheme for Issue of FCCB & Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993.

The FCCB issue needs to conform to External Commercial Borrowing guidelines, issued by RBI vide Notification No. FEMA 3/2000-RB dated May 3, 2000 as amended from time to time.

Suzlon Energy Limited May 16, 2007 launched and priced a Foreign Currency Convertible Bonds (FCCBs) issuance for an amount of USD 300 million. The FCCBs, which have a maturity of 5 years and 1 day, are convertible at a conversion price of Rs 1,800 per share. The FCCBs is listed on the Singapore Exchange Securities Trading Ltd. Deutsche Bank is the Sole Bookrunner to the transaction; and Yes Bank Ltd. advisor to the Company.

May 16, 2007 launched and priced a Foreign Currency Convertible Bonds (FCCBs) issuance for an amount of USD 300 million.

The FCCBs, which have a maturity of 5 years and 1 day, are convertible at a conversion price of Rs 1,800 per share.

The FCCBs is listed on the Singapore Exchange Securities Trading Ltd.

Deutsche Bank is the Sole Bookrunner to the transaction; and Yes Bank Ltd. advisor to the Company.

References Reserve Bank of India www.rbi.org.in Ministry of Finance www.finmin.nic.in Foreign Exchange Management Act www.femaonline.com www.banknetindia.in www.lawandlaws.sulekha.com www.indlaw.com

Reserve Bank of India

www.rbi.org.in

Ministry of Finance

www.finmin.nic.in

Foreign Exchange Management Act

www.femaonline.com

www.banknetindia.in

www.lawandlaws.sulekha.com

www.indlaw.com