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Debt
High interest or Coupon rate ECB limited to Capital goods, capacity augmentation, overseas acquisitions
FCCB Low coupon/interest compared to debt No immediate dilution of equity No cash payment in good market All transactions in foreign currency
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Aurbindo Pharma Bajaj Hindusthan Moser Baer Wockhardt Ranbaxy Reliance Communication
150 USD 120 USD 75 USD 110 USD 440 USD 500 USD
Tata Chemicals
Tata Motors
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Jan, 2010
Jun, 2012
150 USD
450 USD
FCCB - Wockhardt Case
231
961
268.80
598.95
3
Capital in $
Benefits to Issuer
FCCB can be raised in a month usually and thus takes lesser time. Low overseas interest rate Credit rating is not mandatory, since bonds are issued by top corporate having excellent track record. Low cost means of financing
Benefits to Investor
Help to diversify their portfolio Find better option to invest in emerging markets like India If share price goes up benefit from the capital appreciation Assured of fixed return and capital appreciation.
FCCB - Wockhardt Case 4
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Guidelines 2004 Companies 80% revenue must come from following operations Entertainment Software
Pharmaceutical
Biotechnology Any other as specified by Government
Company can issue FCCB only up to 51% of its issued & subscribed capital
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Guidelines 2009 Company can issue FCCB only up to value of USD 500 million in a single year Should be listed on BSE and NSE
Wockhardt An Introduction
Wockhardt is a global pharmaceutical and biotechnology company Most part of its revenues comes from Europe and
Esparma of Germany
Irish firm Pinewood Laboratories Dumex India Pvt. Ltd. Negma Labs of France Morton Grove Pharmaceuticals of US
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technological capabilities
To achieve the corporate objective of $ 1 billion
turnover by 2009
Setup of a SEZ near Aurangabad, Maharashtra
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Risks in FCCB
FCCB loan is Redeemable at 129% on Maturity Date Exchange Difference is uncertain in nature
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in 2009
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Terms of CDR
Bondholders are offered Buy Back at 65% haircut of conversion price Exchange Bonds for Preference shares which
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rampant acquisitions
More importance to economic environment
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