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Issue of Foreign Currency Exchangeable Bonds Scheme,
2008
February 15, 2008
Press Release
The Finance Minister in his Budget Speech 2007-2008, had announced to
put in place an enabling mechanism to permit Indian companies to unlock a
part of holding in group companies for meeting their financing
requirements by issue of Exchangeable Bonds.
Pursuant to the announcement made by the Finance Minister, Government
have since notified a Scheme on 15th February, 2008 for Issue of Foreign
Currency Exchangeable Bonds. The salient features of the Scheme are 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.
- The full text of the Notification of the Scheme will be available on
the website of Ministry of Finance (www.finmin.nic.in).
BSC/SS/GN-36
Go to
"Income Tax Update - 2008" Listings
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