FCCB's full form is foreign currency convertible bonds. Any bond which
is issued in foreign currency is called FCCB. Main aim of this is to get
debt from foreign countries.
Following are main features of FCCB
1. It is issued in foreign currencies.
2. It is trad-able in foreign stock exchange.
3. Company can use this fund for repaying other for External Commercial Borrowings.
4. Company has to show it on the basis of mark to market.
5. International accounting standard 32, 39 and IFRS 7 will apply on FCCB.
6. This bonds can also convert in equity shares.But it is only under the option of bondholder.
7. These type of bonds are benefited for both issuer company and bondholders. Issuer company can get debt at low rate with this easily. Bondholder has security of return and also option to increase the value of their investment if there is increasing trend of share market.
Loss Due to FCCB
Indian company may get loss due to
1. FCCB's turned out to be very expensive when the share prices of companies starts declining because bondholder get more shares if the follow the option of conversion. So, company's control will move due to this.
2. The problem got further compounded when the exchange rate turned unfavorable as seen by rupee fall. When the FCCBs were taken, the rupee was in the range of Rs 50-54 and now it is Rs 63.71 to a dollar (9th may 2015). Thus, companies need to repay this debt almost 25% more if they have to buy the same number of dollars.
Following are main features of FCCB
1. It is issued in foreign currencies.
2. It is trad-able in foreign stock exchange.
3. Company can use this fund for repaying other for External Commercial Borrowings.
4. Company has to show it on the basis of mark to market.
5. International accounting standard 32, 39 and IFRS 7 will apply on FCCB.
6. This bonds can also convert in equity shares.But it is only under the option of bondholder.
7. These type of bonds are benefited for both issuer company and bondholders. Issuer company can get debt at low rate with this easily. Bondholder has security of return and also option to increase the value of their investment if there is increasing trend of share market.
Loss Due to FCCB
Indian company may get loss due to
1. FCCB's turned out to be very expensive when the share prices of companies starts declining because bondholder get more shares if the follow the option of conversion. So, company's control will move due to this.
2. The problem got further compounded when the exchange rate turned unfavorable as seen by rupee fall. When the FCCBs were taken, the rupee was in the range of Rs 50-54 and now it is Rs 63.71 to a dollar (9th may 2015). Thus, companies need to repay this debt almost 25% more if they have to buy the same number of dollars.
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