Structured and executed by JM Morgan Stanley (JMMS), M&M was able to convert outstanding FCCBs worth US $ 51.67 million into GDRs at discounts to the fixed conversion price and also to the then ruling GDR price.

Between September 7 and September 17, the company offered a special conversion option to 80 per cent of the outstanding amount of $ 80.167 million. Under this special conversion plan, the FCCB holders could exercise the conversion option at a price of $ 10 against the previously fixed conversion price of $ 11.935. The conversion will help the company save on interest cost for the bonds and also on the cost of forward cover for the interest on FCCBs which was to be paid in dollars. This is the first such deal done in the country, andaccording to P Krishnamurthy, vice chairman of JM Morgan Stanley, many more such deals are likely to follow suit.

Whereas the FCCBs were scheduled to be converted into GDRs at $ 11.935 each in July 2001, and the GDRs were trading around $ 10.20, the FCCBs were converted into GDRs at $ 10 each. In a way, the conversion was hugely helped by the recent buoyancy in the domestic as well as the overseas market for Indian scrips. Between July 1 and September 8, M&M GDR price had spurted from $ 6.75 to $ 10.20. This gave the company the leeway to approach the bond holders to get M&M GDRs at a slight discount to the market price.

According to Deevyesh Desai, vice-president at JMMS, while the bond holders got the GDRs at a discount to the market price, the company gained by eliminating foreign exchange risks and also saved on the interest costs. And the special conversion bloated M&M's Rs 103 crore equity capital to the extent of Rs 5 crore only. In July 1996, M&M raised $ 115 million of FCCBs carrying a coupon of5 per cent per annum payable semi-annually in US dollars. The initial conversion price was fixed at $ 11.935 for each GDR with the conversion ratio being fixed at 83.787 GDRs per FCCB. Since issuance, M&M's FCCB liability in rupee terms had increased solely on account of rupee depreciation vis-a-vis the US dollar. Between July 1996 and September 7, 1999, the rupee had depreciated 24 per cent against the US dollar. Since issuance, conversions by FCCB holders and buyback by M&M had reduced the outstanding amount to $ 80.167 million.