Weak rupee spells trouble for FCCB issuers; check them out


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.

Source: Capitaline
* = 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]
Tata Steel 19/11/2009 546.9 31720.2 21/11/2014 605.53 290.55 3947
Sesa Goa 24/09/2009 500 29000 31/10/2014 346.88 145.85 24.88
Tata Motors 9/10/2009 375 21750 16/10/2014 623.88 291.75 1841
Tata Power 6/11/2009 300 17400 21/11/2014 1456.12 82.6 1087.4
Larsen & Toubro 9/10/2009 200 11600 22/10/2014 1908.2 1437.4 1778.1
Videocon Inds 3/12/2010 200 11600 16/12/2015 239.53 223.15 504.55
JP Power 27/01/2010 200 11600 13/02/2015 85.81 22.05 583.67
Suzlon Energy 4/4/2011 175 10150 6/4/2016 54.01 9.66 262.65
Welspun Corp 25/09/2009 150 8700 17/10/2014 300 46.3 640.94
JP Associates 28/08/2012 150 8700 18/09/2017 77.5 63.35 1022.2
REI Agro 23/10/2009 105 6090 13/11/2014 46.7 13.55 274.76
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