Business Daily from THE HINDU group of publications
Thursday, Apr 02, 2009
ePaper | Mobile/PDA Version | Audio | Blogs
Business Daily from THE HINDU group of publications Thursday, Apr 02, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Markets
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Corporate Bonds Web Extras - Industry Associations Our Bureau Mumbai, April 1 A report on Indian capital market brought out by FICCI and Ernst & Young has underlined the need for more instruments for financing long-term capital requirement of companies in these challenging times. The report suggested two new instruments for raising long-term capital: the issuance of exchangeable bonds and offering of non-convertible debentures with warrants. Exchangeable bonds are a form of hybrid instruments issued by a company, which can be converted to equity shares of another group company. By issuing exchangeable bonds, an issuer can leverage upon the group companies’ strengths to issue such bonds on favourable terms, while meeting its financing requirements, the report said. “It can turnout to be an interesting tool for groups operating through multiple companies,” it observed. On non-convertible debentures with warrants, which were allowed by SEBI in December 2008, the report said, “The product can be viewed as a domestic counterpart to FCCBs (Foreign Currency Convertible Bonds), and therefore can play a notable role to fill the vacuum created by declining FCCB issues.” SEBI allowed listed companies to make a combined offering of non-convertible debentures with warrants to qualified institutional buyers.
The report also delves on limited financing options for the companies with equity markets going through a bearish phase “Given the poor valuations prevailing across sectors in India, equity financing has shrunk, rights issues have been the only exception as far as equity funding is concerned.” The companies have refrained from approaching new investors and have opted to rely on their existing investors for funding, it said. The report saw more depth coming in the Indian capital market with inflows from new pension scheme which has been extended to the private sector from May 1. “With the extension of the new pension scheme (NPS) to the private sector from May 1, an estimated 80 million people are set to join the NPS over the next five years, lending some depth to the capital markets.” More Stories on : Corporate Bonds | Industry Associations
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