Companies are rushing to buy back Foreign Currency Convertible Bonds (FCCBs) as the RBI’s deadline of March 31 draws closer. Firms such as Mahindra & Mahindra ($11 million), Uflex ($45 mn), Moser Baer ($4 mn) have announced FCCB buybacks in the past few days while others such as GV Films, Nahar Industrial, Everest Kanto have said they are considering bond repurchases. An FCCB is a convertible bond that is a mix between a debt and equity instrument. It acts like a bond by making regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock.
Around 156 companies have issued FCCBs between 2006 and 2008 raising close to $15 billion, according to Reliance Money.
According to an investment banker, "now many of these bonds are trading at steep 50% discounts. So, if a seller is available then you can buy FCCB bonds worth $10 million for only $5 million”.
After buying back FCCBs worth $4 million in late January, auto major Mahindra & Mahindra on Thursday repurchased 65 FCCBs each of $100,000 aggregating $6.5 million at a discount, as per a company filing. These bought back FCCBs will now be cancelled. Likewise, packaging company Uflex has bought back 450 FCCBs at a nominal value of $100,000 each aggregating to $45 million due in 2012. Moser Baer also has bought bonds worth $1.22 million on Thursday in addition to $1.96 million it purchased earlier.
Already, many companies including Jubilant Organosys ($59 million), Reliance Communications ($35 mn), Radico Khaitan ($10 mn), Hotel Leelaventure (Euro 11 mn), Tulip Telecom ($30 mn) and Financial Technologies ($5.5 mn) have repurchased bonds worth over $175 million in the recent past, say analysts. Aggressive companies went in for the FCCB route to fund their expansion/acquisition plans because of the shorter lead times associated with the process as well as the fact that companies gained exposure to a global investor base.
In December 2008, the RBI allowed Indian companies to buy back FCCBs prematurely by raising ECBs under the automatic route at a minimum discount of 15% to that of the book value.
Around 156 companies have issued FCCBs between 2006 and 2008 raising close to $15 billion, according to Reliance Money.
According to an investment banker, "now many of these bonds are trading at steep 50% discounts. So, if a seller is available then you can buy FCCB bonds worth $10 million for only $5 million”.
After buying back FCCBs worth $4 million in late January, auto major Mahindra & Mahindra on Thursday repurchased 65 FCCBs each of $100,000 aggregating $6.5 million at a discount, as per a company filing. These bought back FCCBs will now be cancelled. Likewise, packaging company Uflex has bought back 450 FCCBs at a nominal value of $100,000 each aggregating to $45 million due in 2012. Moser Baer also has bought bonds worth $1.22 million on Thursday in addition to $1.96 million it purchased earlier.
Already, many companies including Jubilant Organosys ($59 million), Reliance Communications ($35 mn), Radico Khaitan ($10 mn), Hotel Leelaventure (Euro 11 mn), Tulip Telecom ($30 mn) and Financial Technologies ($5.5 mn) have repurchased bonds worth over $175 million in the recent past, say analysts. Aggressive companies went in for the FCCB route to fund their expansion/acquisition plans because of the shorter lead times associated with the process as well as the fact that companies gained exposure to a global investor base.
In December 2008, the RBI allowed Indian companies to buy back FCCBs prematurely by raising ECBs under the automatic route at a minimum discount of 15% to that of the book value.
