HCC to repay Rs 550 cr if its bonds not converted to equity

Hindustan Construction Company today said it is ready to pay back Rs 550 crore, taken as debt in the form of Foreign Currency Convertible Bonds, if the FCCBs do not get converted into equity.

"In the event, if the FCCBs do not get converted, we will repay them (investors) and we are fully prepared to repay them with sufficient internal accruals and cash available with us," HCC Chairman Ajit Gulabchand told reporters here on the sidelines of India Economic Summit.

HCC has a portfolio of about Rs 550 crore in FCCBs, which will mature in April 2011, Gulabchand added.

To access cheap foreign currency debt, many midcap companies like HCC had issued FCCBs in 2005-06 and provided their holders the option to convert the bonds into equity within the pre-determined period and price.

FCCBs are zero-coupon bonds and companies have to pay the redemption amount, along with the compounded interest. Under accounting principles, repayment to FCCB holders will entail the company charging the interest paid to the profit and loss account, thereby impacting profits in that fiscal to that extent.

"The current share price of HCC is more than 70 per cent lower than at the prices FCCBs were issued," Consortium Securities AVP Vishwesh Choudhary said.

Gulabchand also said that Lavasa Corporation, a subsidiary of the HCC, has filed its draft red herring prospectus (DRHP) with market regulator Sebi for Rs 2,000 crore initial public offer (IPO) and is waiting for the approval.

"We will make a decision about the dates to launch IPO, once we receive Sebi approval," he added.

Scrips of the HCC closed at Rs 61.90 a piece on the Bombay Stock Exchange on Friday, down 3.51 per cent from the previous close.