FCCB: luring those who eye cheap money from abroad

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: the last fortnight before the ‘relevant date’ which is a month before the general meeting approving the overseas issue. Such a provision makes it easy to raise capital in a situation when stock prices are generally on the rise. In a bearish market run, the stock prices fall and it becomes difficult to raise capital. However, the situation could be different, if in spite of a bearish domestic market, the international market where the money is proposed to be raised is vibrant.

What factors must the investors take into account while exercising a) the call option in an FCCB, b) the put option (equity) in an FCCB?

FCCB issues have a ‘call’ and a ‘put’ option to suit the structure of the bond. It all depends upon the structure of the instrument as to which party has a call or a put option. An investor having call option would exercise the option if the interest rate rises. This would enable him to recall his low interest yielding funds and invests it afresh for better returns.