Buyback/Prepayment of Foreign Currency Convertible Bonds (FCCBs) - RBI instructions
RBI has decided to liberalise the procedure and consider applications for buyback of FCCBs by Indian companies, both under the automatic and approval routes:
A. Automatic Route:
The designated AD Category - I banks may allow Indian companies to prematurely buyback FCCBs, subject to compliance with the terms and conditions as:
i) the buyback value of the FCCB shall be at a minimum discount of 15 per cent on the book value;
ii) the funds used for the buyback shall be out of existing foreign currency funds held either in India (including funds held in EEFC account) or abroad and/or out of fresh ECB raised in conformity with the current ECB norms; and
iii) where the fresh ECB is co-terminus with the outstanding maturity of the original FCCB and is for less than three years, the all-in-cost ceiling should not exceed 6 months Libor plus 200 bps, as applicable to short term borrowings. In other cases, the all-in-cost for the relevant maturity of the ECB, as laid down in A. P. (DIR Series) No.26 dated October 22, 2008 shall apply.
B. Approval Route:
The Reserve Bank will consider proposals from Indian companies for buyback of FCCBs under the approval route, subject to compliance with the following conditions:
i) the buyback value of the FCCB shall be at a minimum discount of 25 per cent on the book value;
ii) the funds used for the buyback shall be out of internal accruals, to be evidenced by Statutory Auditor and designated AD Category - I bank's certificate; and
iii) the total amount of buyback shall not exceed USD 50 million of the redemption value, per company.
RBI Circular No. 39 dated 8th December, 2008