Foreign currency convertible bonds (FCCBs) and foreign currency exchangeable bonds (FCEBs) are both aimed at to finance business of Indian companies, but the two are quite different in methodology. Bring out the similari

Foreign Currency Convertible Bonds (FCCBs) and Foreign Currency Exchangeable Bonds (FCEBs) are both instruments used by Indian companies to raise capital from international markets. While they share some similarities, their methodologies and underlying assets for conversion differ significantly. Similarities between FCCB and FCEB: Issued by Indian Companies: Both types of bonds are issued by Indian companies to raise foreign currency funds. Denominated in Foreign Currency: Both bonds are denominated in a foreign currency, typically USD, EUR, or GBP. Principal and Interest in Foreign Currency: The principal and interest payments (if not converted into equity shares) are payable in foreign currency. Maturity: The maturity of both bonds is generally not less than 5 (Five) years. Distinctions between FCCB and FCEB: S.No. FCCB's (Foreign Currency Convertible Bonds) FCEB's (Foreign Currency Exchangeable Bonds) (i) Optionally convertible into a fixed number of equity shares of the issuer company , or take maturity value with interest. Exchangeable partly or fully into equity shares of a promoter group company , known as 'Offered Company' (O.C.). (ii) 25% of proceeds can be used for general corporate restructuring. No such clause is applicable; proceeds are typically used by the issuer for its own business or to acquire shares of the 'Offered Company'. (iii) If the conversion is in favour of the Bond holder as per the prevailing price of equity shares of the issuer in the Indian market, then conversion is preferable; otherwise, take back majority value & interest. Wholly or partially convertible into the shares of the 'Offered Company' (O.C.) - not the issue company. (iv) It involves two parties: (i) Indian issuer company, (ii) Person resident outside India (investor). It involves at least three parties: (i) Issuer Indian company, (ii) Offered Company (O.C.), (iii) Investor-resident outside India. (v) Issue of attached warrant is not permitted. Warrant can be attached in this instrument. (vi) One Indian company alone can issue and implement. Only a member company of a group of companies can only do so and implement. (vii) It is simpler in procedure. It is a bit complex procedure.