Govt allows revision of FCCB conversion price

Extending a major sop to companies that issued foreign currency convertible bonds (FCCBs) before 27 November, 2008, the government has allowed for revision of FCCB conversion price by such companies to a level that would be as close as possible to the market price.

With the move, companies would be able to revise their FCCB conversion price to the average weekly high and low share prices for the two weeks prior to the relevant date, which is the date the board decided to issue the securities. This is against the previous minimum conversion price that had to be determined as the higher of the average for six months and two weeks.

The pricing norms under the FCCB scheme were last revised by the government on 27 November, 2008.

The latest flexibililty would be available for six months from today with approval of the Reserve Bank of India needed prior to the revision of the conversion price according to the finance ministry.

The beneficiaries of the move would be companies that had issued FCCBs before 27 November, 2008, but later found that they could not honour the redemption requests as they did not have the cash flows when bondholders did not want conversion.

FCCB holders were not keen on conversion following the sharp fall in market price of the shares with the global financial meltdown.