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India Inc raises $500 mn in FCCBs
India Inc has stepped up efforts to raise funds from overseas markets through the foreign currency convertible bonds (FCCB) route in 2005, with a whopping over $500 million being raised in January alone.
India Inc has stepped up efforts to raise funds from overseas markets through the foreign currency convertible bonds (FCCB) route in 2005, with a whopping over $500 million being raised in January alone.
Companies cutting across all industry sectors have either completed the issues or are in the process of tapping international markets to raise funds to feed expansion activities including acquisitions.
Most of the issues during the month have been raised at a premium, ranging from 30 per cent to as much as 70 per cent to the prevailing price of the company's share on the major bourses at the time of raising.
"The hefty premium indicates good demand for Indian paper overseas", said an official in a leading bank, adding that Singapore Stock Exchange is emerging as a destination of choice for listing of the issues.
Essar Oil's $166 million FCCB issue to part finance its oil refinery project being set up at Vadinar in Gujarat is the biggest issue during the month, with group company Essar Shipping raising another $47 million to part finance the Vadinar oil terminal project at Jamnagar.
Tata Chemicals also raised $150 million to fund new projects, expansion plans and overseas investments.
Jaiprakash Associates increased the size of its issue to $100 million from $75 million announced earlier and said it would be listed on Singapore Stock Exchange.
Glenmark Pharmaceuticals announced on Tuesday that it has launched a $70 million offer to raise funds for overseas acquisitions and invest in assets and subsidiaries. The bonds, which have a five-year maturity, were launched on January 31 in two tranches.
Under tranche one, for $20 million, bonds are convertible at a price of Rs 862.394 per share, a 71 per cent premium to the weighted average closing price of Rs 504.324 on the Bombay Stock Exchange on January 31.
Tata Chemicals' bonds, which were raised on January 25, are convertible into ordinary or equity shares at a conversion price of Rs 231.37, which is at a 50 per cent premium over the closing price of Rs 154.25 on January 25, 2005 on the Bombay Stock Exchange.
NIIT had also announced earlier this month that it planned to raise up to $10 million from overseas market through FCCBs or private placements, which may be converted into equity shares.
FCCBs are bonds that can be converted into shares at a prefixed price at the end of a period. The price is decided at the time of issuance of the bonds, that also offer an option to the investor to redeem on maturity.
"The interest in FCCBs is growing due to the fact that there are no lengthy processes of required clearances and the funds can be raised at much lower cost than in an ADR or GDR issue", said an industry official.
In 2004, some of the major FCCB issues included Sun Pharma's $350-million offer, $110 million raised by Wockhardt, $100-million issue of Mahindra & Mahindra and $60 million raised by Jindal Stainless Steel.
