A Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme was notified in 1993 to allow the Indian Corporate sector to access global capital markets through issue of Foreign Currency Convertible Bonds (FCCB)/Equity Shares under the Global Depository Receipt Mechanism (GDR) and American Depository Receipt Mechanism (ADR). The Scheme has been amended several times since then.
Amendment: On or before 15th August 2010 (6 month period from 15th February 2010), the corporates have the option to revise from OLD CONVERSION PRICE norms to NEW CONVERSION PRICE norm (as below) for FCCB’s. The said revision of conversion price is subject to the following conditions:
- Prior approval from RBI (PRBI) is mandatory.
- The issuing Company shall ensure that the revision of price and consequent issue of shares may not breach Foreign Direct Investment (FDI) limit (Sectoral caps) under Automatic or Approval route.
- The issuing Company shall take approval from its Board as well as from its shareholders (Board Resolution + Ordinary Resolution).
- The issuing Company shall enter into a fresh agreement with the FCCB holders in terms of re-negotiation of the conversion price.
Source: Ministry of finance Press Note F.No.9/3/2009-ECB dated 15th February 2010.
[Old Conversion Price]FCCB Pricing Norm prior to 27th November 2008:
Listed Companies – The pricing should not be less than the higher of the following two averages:
(i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock
exchange during the six months preceding the relevant date;
(ii) The average of the weekly high and low of the closing prices of the related shares quoted on a stock
exchange during the two week preceding the relevant date.
The “relevant date” means the date thirty days prior to the date on which the meeting of the general body of shareholders is held, in terms of section 81 (IA) of the Companies Act, 1956, to consider the proposed issue.”
[New Conversion Price]FCCB Pricing Norm from 27th November 2008: similar to QIP pricing under ICDR
Listed Companies – The pricing should not be less than the average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the relevant date; [avg 2 weeks high & low]
The “relevant date” means date of the meeting in which the Board of the company or the Committee of Directors duly authorized by the Board of the company decides to open the proposed issue.”
Source: FINMIN
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