Foreign Currency Convertible Bond - FCCB

FCCB's are nothing but a BOND, it's convertible means it can be converted into Stocks upon redemption or future date totally depends on investor interest if they want it to be converted into Stocks or not.

This bond is having Warrants attached to it, that means if stock price of the company reaches the one that is mentioned in the bond investors have the choice to convert this Bond into Shares getting benefits of appreciation of the stocks, if not than any how Principal will be given back to the investor by the company.

Investor also has the advantage of getting regular Coupon payments each year. 

It is foreign currency means A type of convertible bond issued in a currency different than the issuer's domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency.

Companies issue's FCCB's to raise money in foreign currencies.

FCCB's appear on the liabilities/debt side of the issuing company's balance-sheet.

It's very risky for the company see below example :

Eg : Suzlon issued FCCB, redemption of which is going to be happen on june this year, now since Dollar is already surpasses 55 ( they have issued FCCB when dlr is below 50 ), company facing severe pressure of getting default, since they have issued in dollar and need to pay in dollar...company got the payment in USD/INR BELOW 50 and they need to pay back amount in usd/inr 56..

suppose Suzlon got 1 LAC Dollar = 50 LAC inr

now Suzlon need to pay 1 LAC Dollar = 56 LAC inr..

12 % Loss...also they have paid interest as coupon to investor..
Since Suzlon price is also not appreciated instead it got 70 % reduced..


Many companies in India is facing trouble as FCCB's date near maturity..

Tagged as:FCCB, BONDS