Reliance Communications to take the FCCB buyback route

10 December 2008

Reliance Communications is all set to be the the first corporate to take advantage of the new norms issued by RBI for premature buyback of Foreign currency conveyable bonds (FCCB).

According to a report in the Business Standard, Anil Ambani-promoted Reliance Communications (R-Com) is set to be the first company to buy back foreign currency convertible bonds (FCCBs) after the Reserve Bank of India (RBI) allowed premature buyback of such bonds through rupee resources as well.

Reliance Communications had issued zero-coupon FCCBs in February 2007 to raise $1 billion. The bonds are now trading at a 35 per cent discount to the issue price. At this price, Reliancce Communications will have to spend $650 million on the buyback.

The report said that the company has over Rs10,000-crore in cash reserves ($2 billion at the current exchange rate). This includes about $600 million worth of investments in mutual funds overseas. Sources said the company can also convert a portion of the rupee reserves into foreign currency for the buyback, should the need arise.

Other than Reliance Communications, companies like Amtek Auto, Orchid Chemicals, Bharat Forge, United Phosphorus and Wockhardt are said to be in a position to buy back thier FCCBs.

New norms giving the push factor
Prime Minister Dr Manmohan Singh had cleared a proposal to revise norms last week for foreign currency convertible bonds (FCCBs) and external commercial borrowings (ECBs). The new norms will allow Indian companies to buy back FCCBs.