The regulator is fully justified in arguing that these bondholders are among the most sophisticated investors in the market, and that they should have been well aware of the risk associated with the product. A convertible bond also has the attractive characteristic that, at or before maturity, the bondholder can convert the bonds into equitable equity shares in the company. Trouble at Wockhardt Limited. The product, by its very nature, is a complex one and involves not just a judgment on the credit profile and risk profile of a company but also its growth prospects, which then determines how its share price will move. In , 24, crore was raised, after which issuances dwindled.

It’ll just take a moment. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. However, between the time the conversion was triggered and the shares were allotted, shares of Castex plunged to just This, in turn, meant that these bonds could not be converted into equity and Indian firms were left staring at huge redemptions. 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. Nair, the founder of Leela, hold 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.

ECBs might give companies some breathing room for now, but these borrowings could come at an interest rate of one to stuxy per cent over the London Interbank Offered Rate – the world’s most widely used benchmark for shortterm interest rates. In the meantime, you may want to share this article with your friends!


case study on fccb

According to a Crisil report, bonds worth Rs 31, crore are coming tsudy for redemption within the next 24 months. FINC click on the button below, and select the case from the list of available cases: Else, they settle for redemption of bonds.

The Murphy’s law of foreign currency convertible bonds

Companies prefer issuing FCCBs as the interest rate on them is much lower than that on a regular “domestic” bond. About Us The Equitymaster Way. Nair, the founder of Leela, hold The bondholders approached the Securities and Exchange Board of India Sebi to stop the conversion, alleging price manipulation.

Market Stats Other Indices Gold. And so, redemption is the option for a vast majority of these issues.

You can change your cookie settings at any time but parts of our site will not function correctly without them. Two years back, many investors were selling FCCBs at low prices… we bought them stuy at a discount. It gives the investor upside potential by being able to convert to equity, and the debt element protects the downside.

The Murphy’s law of foreign currency convertible bonds

The complexity of the product has grown over the years and now some ln these issues make conversion mandatory if the share price goes well above the conversion price.

Memories of Venus Remedies still worry industry watchers. These bonds casf redeemable on the maturing date at A company release relating to the loan said: The complex nature of the product means that many things can go wrong. In the most likely scenario of “mass” redemptions of FCCBs inthese companies will choose to exercise one or a mix of the options mentioned below:.

companies in trouble as FCCBs date nears maturity

While companies such as Uflex are cautiously treading the FCCB redemption path, those like Suzlon are confident of sailing through.


With a current debt to equity ratio of 1.

In addition, the domestic bond markets are also showing early signs of deepening. Please find below the full details of the product you clicked a link to view. By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them. This case study was compiled from published sources, and is intended to be used as a basis for vase discussion.

Product details

The green energy major reported a sharp pn in the March quarter, but the stock has mostly remained flat so far. About this item Settings Related products Abstract This structured assignment is to accompany the case. The performance data quoted represents past performance and does not guarantee future results.

case study on fccb

Wockhardt had generated Rs. Comments are moderated by Equitymaster, in accordance with the Terms of Useand may not appear on this article until they have been reviewed and deemed appropriate for posting. Information herein should be regarded as a resource only and should be used at one’s own risk. Samsung has just launched a new sensor for ultra-high resolution mobile photography How to flash Android Q Beta Indians are searching ‘dating’ more than ‘matrimony’: Case Study Volumes Collection.

Because the redemptions were large and had the potential to a pose a systemic risk, regulators were forced to intervene.