The external commercial borrowings and foreign currency convertible bonds raised by Indian companies has fallen drastically to $1.16 bln in April and to $1.28 bln in May 2008 as against $4.5 bln in March 2008, the Reserve Bank of India said. The RBI released the latest figures on ECBs and FCCBs for April and May 2008 on Friday.
In February, Indian corporates raised $862.12 mln as compared to $1.89 bln in January 2008. Last year, due to the ongoing turmoil in the international markets and credit drying up, Indian companies were seen coming back to their origin to raise funds.
There is an increased amount of domestic activity, as Indian corporates are looking at raising capital through domestic bonds and debentures. In April 2008, Reliance Communications was the largest ECB issuer of $250 million for the import of capital goods with a maturity period of 6 years and 11 months, followed by Aban Offshore Ltd, which was the largest FCCB issuer for $200 million. They raised the required capital for overseas acquisition with a maturity of five years.
In May 2008, Jet Airways (India) Ltd was the largest ECB issuer of $287 million for the import of capital goods with a maturity period of 11 years and 10 months. The only FCCB issuer was Cals Refineries Ltd which raised $250 million for the import of capital goods with a maturity period of 6 years and 11 months.
In a bid to help Indian corporates raise money from the overseas market, the Reserve Bank of India (RBI) plans to come out with its guidelines on Foreign Currency Exchangeable bonds (FCEB) within a month from now. FCEBs, issued by an Indian company, are subscribed by non-residents and exchangeable into equity shares of another Indian company, which is termed as the offered company. These instruments are similar to Foreign Currency Convertible Bonds (FCCBs) which allow Indian corporates to raise money from abroad by issuing bonds.
However, incase of FCCBs, the bonds are converted into equity shares of the issuing company while incase of FCEBs, the bonds are converted into shares of a group company of the issuer.
This essentially means that, incase of a FCCB, the company issuing the bonds gets the shares during the time of conversion, while in the case of FCEBs, the bonds can be converted into shares and transferred to the group company of the issuer.
