The Hindu : Business : Cos. allowed to issue FCEB bonds

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Cos. allowed to issue FCEB bonds

The scheme should comply with FDI policy

NEW DELHI: The Finance Ministry on Friday allowed companies to issue foreign currency exchangeable bonds (FCEBs) with a maturity of five years to raise funds from the overseas market by unlocking part of the holding in group companies.

“The investment under the scheme should comply with foreign direct investment policy as well as the External Commercial Borrowing (ECB) policy requirements,” said a Finance Ministry statement adding that these bonds will have a lock-in period of five years but could be exchanged into equity shares of another company before redemption.

The rate of interest on these bonds and the issue expenses would be within the ceiling prescribed by the Reserve Bank under the ECB policy, it added.

The FCEB scheme has been announced by the Government in pursuance of the Finance Minister’s budgetary announcement last year.

The FCEBs would be denoted in foreign currency, and the principal and interest will also have to be paid in foreign currency.

The bonds, to be issued by an Indian company, will be subscribed by non-residents in foreign currency and can be exchanged into equity shares of another company — either wholly or partly.

The Finance Ministry said the company, which issues these bonds and the firm whose shares are exchanged against such bonds, must be part of the same promoter group.

The proceeds of these bonds can be invested in the group companies subject to the end-use norms prescribed by the ECB policy.

“The promoter group company receiving such investments will not be permitted to utilise the proceeds for investments in the capital market or in real estate in India,” the statement said.

However, the proceeds can be invested overseas in joint ventures or wholly-owned subsidiaries within the framework of overseas investment guidelines.

Analysts said the move would allow more Indian companies to access foreign funds at cheap rate, besides facilitating unlocking of value in more domestic firms through listing on stock exchanges. — PTI

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