Foreign currency convertible bonds

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Rajee (Querist)

11 October 2010 Can a private limted company issue FCCBs through private placement to one of its foreign eqiuty shareholder holing 10% of its shares? If so kindly suggest me the procedure.
or
Only listed cos are allowed to issue FCCBs?

kinldy clarify.

Ajay Mishra

Ajay Mishra (Expert)

12 October 2010 Dear Mr. Rajee

Indian companies can raise foreign currency resources abroad through the issue of FCCBs and ADRs/GDRs, in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Central Government thereunder from time to time.

The company can issue FCCBs and ADRs/GDRs if it is eligible to issue shares to persons resident outside India under the FDI Scheme. However, an Indian listed company, which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by the Securities and Exchange Board of India (SEBI) will not be eligible to issue FCCBs and ADRs/GDRs.

Unlisted companies, which have not yet accessed the FCCBs and ADR/GDR route for raising capital in the international market would require prior or simultaneous listing in the domestic market, while seeking to issue such overseas instruments. Unlisted companies, which have already issued FCCBs and ADRs/GDRs in the international market, have to list in the domestic market on making profit or within three years of such issue of FCCBs and ADRs/GDRs, whichever is earlier.

Regards

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