Points to consider for FCCB funding in India:

1. FCCB is a quasi debt instrument which can be converted into equity shares if the investor chooses to do so, at a pre determined strike rate. 2. FCCBs are generally issued by the corporate, which have high promoter shareholding and hence do not perceive any risk of losing management control even after exercise of conversion option. 3. The pricing is generally between 30% to 70% premium over the Current Market Price (CMP) 4. In many cases the issuer looks forward to exercise of option by lender so there is no outflow of find on redemption. 5. Approval of existing consortium of lenders is required. 6. Most of the FCCBs issued by the Indian companies are unsecured. Though sometimes it may be secured. 7. FCCBs can be subordinated to existing debts or can be unsubordinated on case to case basis. 8. The company should have excellent track record, if not so then the rating must be in place. 9. The issuing company need to hedge the forex exposure. 10. The right to convert the FCCB arises immediately after the allotment and can vest for 2-3 years. 11. FCCBs are treated as FDI by Government of India. 12. Pricing: The pricing of FCCB issues should be made at a price not less than the higher of the following two averages: a. The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date; b. The average of the high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the relevant date. The relevant date means the date thirty days prior to the date on which the meeting of the general body of shareholders is held, in terms of section 81(IA) of The Companies Act, 1956, to consider the proposed issue.

Criteria for Issuing FCCB: 1. The companies, who wish to raise the foreign funds by issuing FCCB, require prior permission of the Department of Economic Affairs, Ministry of Finance, Government of India. 2. Should have a consistent track record for a minimum period of three years. 3. The FCCB shall be denominated in any freely convertible foreign currency and the ordinary shares of an issuing company shall be denominated in Indian Currency. 4. The issuing company should deliver the ordinary shares or bonds to a domestic custodian bank as per regulations. The custodian bank on the other hand instructs the overseas depository bank to issue Global Depository Receipt or Certificate to nonresident investors against the shares or bonds held by the Domestic Custodian Bank.