FM
Guidelines on exchangeable bonds: FM Guidelines on budget proposal to allow corporates to issue bonds in the overseas markets, convertible with any group company shares, will be prepared by the FM, reports DD News. The ministry is awaiting a response from the ministry of law.
The Law Ministry may take one to six weeks to inspect the guidelines, which would be on lines of those for foreign currency convertible bonds (FCCBs).
According to the norms of Reserve Bank of India (RBI) for FCCBs, the price need to be adhered to the six-month average price on stock exchange, at the time of issue of the instrument, at the time of converting bonds.
Regulations on sectoral and external commercial borrowing are also likely to apply on exchangeable bonds. An exchangeable bond is a debt-equity instrument that allows large corporate withholding in group companies to reap benefits of a float without actually selling a stake.
Companies like, Tata Sons have evinced interest in issuing such bonds to raise capital.
Exchangeable bonds are different from FCCBs since the latter can be redeemed only with shares of the issuing company and not a group firm in which the issuer has a stake.
