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August 2011

A.P. (DIR Series) Circular No. 1, dated 4-7- 2011 — Redemption of Foreign Currency Convertible Bonds (FCCBs).

By Gaurang Gandhi, Chartered Accountant
Reading Time 2 mins
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This Circular permits Indian companies to refinance their outstanding FCCB under the Automatic Route up to US $ 500 million with immediate effect, subject to compliance with the following:

(i) Fresh ECB/FCCB must be raised with the stipulated average maturity period and applicable all-in-cost being as per the extant ECB guidelines.

(ii) Amount of fresh ECB/FCCB must not exceed the outstanding redemption value at maturity of the outstanding FCCB.

(iii) Fresh ECB/FCCB must not be raised six months before the maturity date of the outstanding FCCB.

(iv) Purpose of ECB/FCCB must be clearly mentioned as ‘Redemption of outstanding FCCBs’ in Form 83 at the time of obtaining Loan Registration Number from the Reserve Bank.

(v) Designated bank is required to monitor the end use of funds.

(vi) Must comply with all other requirements of ECB policy under the Automatic Route, such as eligible borrower, recognised lender, enduse, prepayment, refinancing of existing ECB and reporting arrangements.

ECB/FCCB beyond US $ 500 million for the purpose of redemption of the existing FCCB will be considered under the approval route. ECB/FCCB availed of for the purpose of refinancing the existing outstanding FCCB will be reckoned as part of the limit of US $ 500 million available under the Automatic Route as per the extant norms.

Restructuring of FCCB involving change in the existing conversion price is not permissible. Proposals for restructuring of FCCB not involving change in conversion price will be considered under the Approval Route depending on the merits of the proposal.

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