FCCB stands for Foreign Currency Convertible Bond, which is a bond issued by a country in a foreign currency. It acts as both a debt and equity instrument as the bondholder has the option to convert the bond into the company's equity shares. Many Indian companies issued FCCBs from 2004 to 2007 but are now struggling as the equity markets are lower than expected and most bonds have not been converted. Companies need to repay an estimated Rs. 33,000 crore but may seek to restructure terms, reset conversion prices, or utilize unused portions to emerge from the current crisis over maturing FCCBs.

1. FCCB
 Foreign Currency convertible bond issued by a country
in a currency different than the its own currency
 Powerful instrument by which the country raises the
money in the form of a foreign currency
 Bond acts like both a debt and equity instrument
 Bondholder the option to convert the bond into a
company’s equity share
 Retain all features of a convertible bond

2. Current Crisis
 FCCBs became the favored instrument to raise capital for
Indian companies during the bull run from 2004 to 2007
 A large number of FCCB issued by Indian companies, due
to mature in next future
 Equity market not trading at the levels assumed when the
bonds were issued
 Majority of the bonds have not been converted to equity
 Companies struggling to meet their obligations on the debt

3. Emerge from the crisis
 Need to repay an estimated Rs. 33,000 crore (over
$7 billion)
 The Chinese banks may emerge as the big winners
 Reset the conversion price
 Approaching Investment Banks to be mediator
 Utilising the unused portion

4. Restructuring of FCCBs
 Restructuring is the reorganization of a company's
outstanding obligations
 Mostly done by reducing the burden of the debts on the
company by decreasing the rates paid and increasing the time
the company has to pay the obligation back
 Alternative available to Indian companies is to restructure the
terms of the FCCB in consultation with the bondholders
 May provide a temporary relief to the issuing companies

5. Reprising of FCCB Bonds
 Government has allowed Companies to reprice their
FCCB with QIPs
 Companies can use the last two weeks’ average price
as the minimum conversion price.
Conditions
 Approval of the board and its shareholders for
reprising
 Pricing should not breach FDI limits
 Fresh agreement with FCCB holders
 Approval by the RBI

6. Redemption Call
FCCB
CMP Amt Maturity Conversio Diff **
(Rs ) * ($ mln) date n (%)
price (Rs)
Panacea Biotec 210 36.8 Feb 11 358 -41.3
Amtek India 64 47.0 Oct 10 120 -46.5
Bharati Shipyard 272 46.9 Oct 10 498 -45.3
3i Info 68 20.2 Mar 11 115 -41.0
Bajaj Hind 129 99.6 Feb 11 465 -72.4
HCC 63 100.0 Mar 11 248 -74.7
Videocon Ind 263 42.3 Feb 11 449 -41.4
Amtek Auto 167 136.1 June 11 210 -20.6
Aban Offshore 813 66.1 Apr 11 2789 -70.8
India Cement 115 75.0 May 11 306 -62.5
Jubilant Life Sci. 313 142.1 May 11 413 -24.2
Glenmark Pharma 324 30.0 Jan 11 583 -44.4
Punj Lloyd 125 49.7 Apr 11 273 -54.0

7. Thank you!!!