FOREIGN CURRENCY CONVERTIBLE BOND :( FCCB)

FOREIGN CURRENCY CONVERTIBLE BOND :( FCCB)

BOND:

                Bond is a debt instrument. It has limited maturity period with pre-determined coupon rate.

CONVERTIBLE BOND:

                                                Convertible bond means a bond which will be converted into equity share after certain period of time.

FOREIGN CURRENCY:

                                                Currency other than domestic currency.

                                From the above discussion it can be said that foreign currency convertible bond is a special type of debt instrument which is denominated in foreign currency issued by a country in the form of foreign currency convertible bond. FCCB is a bond issued in accordance with the guidelines dated 12^th nov. 1993 as amended from time to time and subscribed by non-resident.

ADVANTAGES:

1.       The convertible bond has flexibility to convert into equity share.

2.       Since it has conversion facility its rate of interest rate will be lower than the normal rate of interest.

3.       It is easily marketable as it has conversion facility.

4.       Company raising finance by issuing convertible debt instrument which diluate holding of company at a later date by issuing equity share at a later date.

DISADVANTAGE:

1.       Exchange risk is high because of interest on bond is payable in foreign currency.

2.       FCCB imply creation of additional debt obligation and forex outgo.