Accounting treatment of OCRPS
This query is : Open
18 March 2026
We are evaluating the accounting classification (Ind AS 32) for a proposed investment structured as Optionally Convertible Redeemable Preference Shares (OCRPS) with the following key terms:
If the Company raises additional USD 30 million before 31-Mar-2029, the OCRPS will be converted into ordinary shares.
Until conversion, the instrument carries 15% p.a. compounded return, which will be converted into equity.
If the conversion does not happen by 31-Mar-2029, investors will have the following rights:
Put Option – Investor can demand repayment (Accrued Amount)
Drag Along Right – Can force sale of shares
Quarterly cash dividend payout, or
Conversion into a 5-year loan
Management expects the additional USD 30 million funding to be raised within the next 4–5 months, leading to conversion into equity.
Query:
In this scenario, should the OCRPS be classified as:
Equity,
Compound Instrument, or
Financial Liability
considering:
the presence of contingent redemption/put options, and
the expectation of near-term conversion?
If the Company raises additional USD 30 million before 31-Mar-2029, the OCRPS will be converted into ordinary shares.
Until conversion, the instrument carries 15% p.a. compounded return, which will be converted into equity.
If the conversion does not happen by 31-Mar-2029, investors will have the following rights:
Put Option – Investor can demand repayment (Accrued Amount)
Drag Along Right – Can force sale of shares
Quarterly cash dividend payout, or
Conversion into a 5-year loan
Management expects the additional USD 30 million funding to be raised within the next 4–5 months, leading to conversion into equity.
Query:
In this scenario, should the OCRPS be classified as:
Equity,
Compound Instrument, or
Financial Liability
considering:
the presence of contingent redemption/put options, and
the expectation of near-term conversion?
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