A falling rupee is bad news for companies that had raised capital through foreign currency convertible bonds, if the stock price is quoting at a steep discount to the conversion price. What this means is that the bond holders will ask for their money back, along with interest, instead of converting the loans into equities.
It is a double whammy for the FCCB issuing companies because the weak rupee means not only will the companies have to repay the loans, but there will be an added cost because of the weak rupee. There is a possibility that the rupee may stabilize by the time the bonds come up for redemption, and the impact may not be as bad as feared. However, in the short term, the company will have to make provide for the currency loss in their profit & loss statements.
Following are the companies that have raised capital between USD100-550 million through FCCBs over the last five years.
* = Rs 58 per dollar conversion rate
|Company||Source||Issue Size||Issue||Maturity Date||Conversion||Latest||Cash|
|Date||(USD mn)||(Rs mn)*||Price (Rs)||Price (Rs)||[Latest]|
|Larsen & Toubro||9/10/2009||200||11600||22/10/2014||1908.2||1437.4||1778.1|