Until early this year, foreign currency convertible bonds (FCCBs) were regarded as one of the “most preferred” options for raising corporate finance.
Suddenly, FCCBs have become millstones around the necks of issuing companies, with dismal share valuations prompting bondholders to redeem rather than convert them.
The liquidity crunch and the redemption pressure on issuers have caused the Reserve Bank of India (RBI) to step in and liberalize FCCB buybacks, which previously were highly regulated.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm that provides legal and tax counselling. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
