Foreign Currency Exchangeable Bonds Scheme, 2008 notified

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Foreign Currency Exchangeable Bonds Scheme, 2008 notified

AIT News Network

NEW DELHI. The Government has notified Foreign Currency Exchangeable Bonds Scheme, 2008 on 15^th February, 2008 as a mechanism to permit Indian companies to unlock a part of holding in group companies for meeting their financing requirements by issue of Exchangeable Bonds.

The Scheme is as follows:

Foreign Currency Exchangeable Bond ”is a bond expressed in foreign currency, the principal and interest in respect of which is payable in foreign currency, issued by an Issuing Company and subscribed to by a person who is a resident outside India in foreign currency and exchangeable into equity share of another company, to be called the Offered Company, in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments. “
The Issuing Company shall be part of the promoter group of the Offered Company and shall hold the equity share/s being offered at the time of issuance of Foreign Currency Exchangeable Bond.
The Offered Company shall be a listed company which is engaged in a sector eligible to receive Foreign Direct Investment and eligible to issue or avail of Foreign Currency Convertible Bond or External Commercial Borrowings.
The investment under the scheme shall comply with the Foreign Direct Investment policy as well as the External Commercial Borrowing Policy requirements.
The proceeds of Foreign Currency Exchangeable Bond can be invested by the issuing company in the promoter group companies and shall be used in accordance with end uses prescribed under the External Commercial Borrowings policy. The promoter group company receiving such investments will not be permitted to utilize the proceeds for investments in the capital market or in real estate in India.
The proceeds of Foreign Currency Exchangeable Bond can also be invested by the issuing company overseas by way of direct investment including in Joint Ventures or Wholly Owned Subsidiaries subject to the existing guidelines on Indian Direct Investment in Joint Ventures or Wholly Owned Subsidiaries abroad.
The rate of interest payable on Foreign Currency Exchangeable Bond and the issue expenses incurred in foreign currency shall be within the all in cost ceiling as specified by Reserve Bank of India under the External Commercial Borrowings policy.
At the time of issuance of Foreign Currency Exchangeable Bond the exchange price of the offered listed equity shares shall be as per FCEB Scheme.
The minimum maturity of the Foreign Currency Exchangeable Bond shall be five years for purposes of redemption. The exchange option can be exercised at any time before redemption.
The proceeds of the Foreign Currency Exchangeable Bond shall be retained and/or deployed overseas in accordance with the policy for the proceeds of External Commercial Borrowings.
The Tax treatment on Exchangeable Bonds would be as per FCEB Scheme.