RBI extends deadline for buyback of FCCBs

The Reserve Bank of India has extended the deadline for completing buyback of foreign currency convertible bonds by nine months to December 31, 2009. In a circular issued last on Friday, it said that the other terms and conditions for the buyback would remain unchanged.

According to the scheme RBI announced in December, a company can buy back FCCBs out of rupee resources if there is a minimum discount of 25 per cent on the book value. The central bank also stipulated that the resources for the buyback have to be drawn from the company’s internal accruals. Companies were also allowed to raise additional proceeds through external commercial borrowings to finance the buyback.

The decision to allow buybacks was triggered by the sharp erosion in FCCB prices.

The move has been prompted by the difficulties being faced by companies in raising funds to buyback the bonds due to the tight liquidity conditions in the overseas markets.

Of the 156 companies that raised money through FCCBs nine companies have exercised a premature buyback option after RBI announced the scheme in December 2008.

Those exercising the option include Mahindra & Mahindra, Reliance Communications, Tulip Telecom, Moser Baer, Jubilant Organosys, Radico Khaitan, Hotel Leela, Pidilite Industries and Uflex. Together, these firms have bought back bonds worth $240 million (around Rs 1,200 crore) at a discount of 30 to 50 per cent on the face value.

Also read: 
March 9: FCCB buyback deadline may be extended