Morals of redeeming FCCB
Some time in the recent past, RBI permitted Indian Companies who had maturity claims on their ForeignCurrency Convertible Bonds to redeem the Bonds . FCCBs are a novel instrument of debt which facilitate the Companies to convert the outstanding amount in to equity at an agreed price at a future date in order to avoid debt servicing. When the markets were on a bull run, many Indian Companies issued this paper instrument to many FII and foreign investors believing that the bull run will carry their stock prices perennially further so that they could attract this cheaper form of finance eternally. Lehman Brothers, AIG, Citi Bank all reputed investment banks went for a nosedive, the derivatives markets brought many banks to thier knees for their exposure on these instruments which went for a tailspin. Indian bulls were outsmarted when FII took away thier money in tranches with LIC,GIC,UTI putting our poor people;s money in to the market to slide the arrest of prices. Now no investor will touch Indian paper with a barge pole when FCCBs matured for redemption. The claims of our FM and PM not withstanding our Rupee went a begging vis-avis US dollar and last count it was trading for close to Rs.50 as against Rs.37-38 some few months back,. To redeem FCCB now, Indian firms need to pay lesser dollars than what they should have. RBI permitted Indian companies to redeem FCCB claims through ECB . Many companies cleansed their balance sheet of this paper. the investor got his money albeit eaten away partially against a depreciating rupee and the Companies saved the day with lesser FOREX outgo.
Now tell me if such an investor will ever dare to invest in such instruments of Indian Companies in future? Tell me whether it is morally correct to cheat an investor?
|
|
