India Inc fails to cash in on FCCB buyback: report

Cash starved Indian companies are finding it difficult to buy back bonds from global markets, though they are trading at a discount, due to lack of fund raising options and surplus cash.     

A study by Edelweiss Research on BSE 500 firms, which have issued foreign currency convertible bonds (FCCB), showed that on an aggregate basis FCCBs worth $11.1 billion were outstanding as on April 25, 2009.      

"Unavailability of surplus cash and difficulties in raising fresh external commercial borrowings (ECB) have kept corporate houses away from FCCB buyback," the report said.      

Only 17 companies could mobilise resources to finance the FCCB buyback. 

"On an aggregate basis, FCCBs of only $472 million have been bought back by 17 companies at an average discount of 39 per cent. This translates into an estimated profit of $182 million," the report said.      

"The only factor that is holding back firms from buying back FCCBs is cash flows. The moment they have cash they will buy ourstanding FCCBs which are now available at lucrative prices," Ashika Stock Brokers Research Head Paras Bothra said.      

However, some companies prefer to hold liquidity in the current uncertain scenario, while others prefer to continue their ongoing capex plans rather than opting for buyback, the report said, adding that India Inc would shell out $14.3 million from its kitty for redemption if the outstanding bonds were not converted into equity.