Foreign Currency Convertible Binds FCCBs

What is Foreign Currency Convertible Bonds (FCCBs)?

Foreign Currency Convertible Bonds (FCCBs) were foreign currency (normally dollar) denominated convertible debt papers issued in international markets by companies.These instruments are to be understood the way convertibles are with only disparity that they are usuallyoptionally convertible and issued offshore in altered denomination under guiding principle as defined by Reserve Bank of India (RBI) periodically.

The payment of interest and repayment of principal (if occurs) on these bonds is in foreign currency.

On the other hand, once conversion of instrument occurs in equity, dividend is paid in Indian Rupees with conversion obligation (currency risk) lying with the investors.

FCCBs are controlled by RBI messages under FEMA-Foreign Exchange Management Act.

The Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism), 1993 lays down the guiding principles for such matters.