RBI allows select banks to buy back FCCBs

On November 15, 2008, the Reserve Bank had announced that proposals by Indian companies for premature buyback of foreign currency convertible bonds (FCCBs) would be considered under the approval route, provided that the buyback is financed by the company's foreign currency resources held in India or abroad and/or out of fresh external commercial borrowings (ECBs) raised in conformity with the current norms for ECBs.

Extension of FCCBs was also permitted at the current all-in cost for the relevant maturity. On a review, it has now been decided to permit Authorized Dealers Category - I banks to consider applications for premature buyback of FCCBs from their customers, where the source of funds for the buyback is:

i) foreign currency resources held in India (including funds held in EEFC accounts) or abroad and/or

ii) fresh ECB raised in conformity with the current ECB norms, provided there is a minimum discount of 15 per cent on the book value of the FCCB. In addition, the Reserve Bank will consider applications for buyback of FCCBs out of rupee resources provided that:

(i) there is a minimum discount of 25 per cent on the book value;

(ii) the amount of the buyback is limited to US $ 50 million of the redemption value per company; and

(iii) the resources for buyback are drawn out of internal accruals of the company as certified by the statutory auditor.

Source : Equity Bulls

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