Foreign Currency Convertible Bond (FCCB)
Is it true that the foreign convertible bond markets are turning into a large threat for private equity firms in India? It might seem true if we apparently take a look on the facts. It happens for the reason that for the most part of the Indian companies prefer to lift up funds through FCCBs than going to NASDAQ or Luxemburg or to the PE firms.
According to the reports, market data and bank sources out of the $7 billion worth of convertible bonds, which are issued in Asia up to now this year, Indian companies account for $2.7 billion, or 38 percent. K. Balakrishnan, managing director and chief executive at Lazard India said "They (convertible bonds) are a lot easier than private equity deals which come with strings attached ... like board representation."
However, according to my observation FCCB is a short-term fashionable trend. There were large numbers of hedge funds who were enthusiastic to invest in FCCBs issued by Indian companies at the time when the international interest rates were low. If my sources are to be believed and understood, this state of affairs may not go on for long in view of the fact that the interest rates are going up and as a result the hedge funds may find improved ways to set up their money. It is a fact that PE firms had a better year last year.
In accordance with what is told by Venture Intelligence Ltd, which is a private, equity and venture capital tracking firm. There were 100 deals worth a total $1.22 billion in January to September, in opposition to 67 deals worth $1.6 billion in all of year 2004.
On the other hand, PE will still considered to be a better than the best option for entrepreneurs given that it not only brings in money but also because of its unmatchable credibility and governance standards. With Warburg's investment in Bharti, the telco turn out to be one of the most up to the standard firms used for investment.
There is another term which is known as reverse convertible bonds whose pricing is quite fair. Sometimes because of reverse convertible bonds the market is free from arbitrage but this definition doesn't always works.
Terms And Conditions >> Privacy >> Contact Us
|