Top banks, PNB, BOB, cut interest rates

Come January 1 2009 and two leading public sector lenders Punjab National Bank and Bank of Baroda will reduce their prime lending rate by 50 and 75 basis points.

The BPLR of PNB would stand reduced to 12 per cent, from the existing 12.50 per cent, effective from January 1.PNB also announced a reduction in its peak deposit rate by 100 basis points to 8.5 per cent for deposits of one year to less than three years beginning new year.Earlier this month, the bank had reduced its peak deposit rate to 9.50 per cent from 10.5 per cent.

In a separate regulatory filing to the BSE, Bank of Baroda said "The bank has decided to reduce its Benchmark Prime Lending Rate (BPLR) by 75 basis points from existing 13.25 per cent to 12.50 per cent with effect from January 1, 2009."

LIC raises stake in HDFC Bank to over 5 per cent

Country's largest insurer Life Insurance corporation of India has increased its stake in HDFC Bank to over five per cent following acquisition of shares from the open market.LIC purchased 1.6 lakh shares from the open market hiking its stake in
the company to 5.01 per cent.The equity holding of the insurer increased by 0.04 per cent from 4.97 per cent earlier.

As on June 2008, LIC holding in the bank stood at 2.15 per cent which went up to 4.7 per cent in September this year.Yesterday, LIC hiked its stake in Vijaya Bank to 9.53per cent by acquiring shares worth nearly Rs 30 crore from the open market.

Domestic institutional investor acquired over 94.29 lakh shares representing 2.18 per cent stake in the state-run lender.Before the acquisition, LIC held over 3.18 crore shares representing 7.38 per cent stake in the bank which subsequently increased to 9.53 per cent after the purchase.

Swiss Finance Corp raises its stake in Amtek Auto to 8%

Mauritius-based Swiss Finance Corporation (SFC) has bought an additional 4% stake in Amtek Auto through open market purchases.The foreign investor acquired a total of 57.2 lakh shares for about Rs 31 crore on December 12 ‘08. Post-acquisitions, SFC’s
stake in the company has gone up to 8.2% of the equity, according to disclosures filed with the Bombay Stock Exchange.

The Amtek Auto stock has risen sharply by 52% in the past one month. Warburg Pincus, Citigroup, Credit Suisee Singapore, CLSA Mauritius and Sansar Capital Mauritius are among other major foreign institutional investors holding a substantial stake in the company.

Amtek Auto is part of Amtek Group, one of major players in automotive components industry with production facilities located across North America, Europe and Asia.

Petrol begins to flow from RPL's refinery

Reliance Petroleum (RPL), a subsidiary of Reliance Industries, commissioned its 27-million tonne export refinery in Jamnagar on Thursday, putting to rest market speculation of a possible delay following a global demand slump for petroleum products.

The RPL refinery, which will be capable of processing 5,80,000 barrels of oil per day (bopd), has been developed in partnership with Chevron of US, which holds a 5% stake in the refinery. This is the second refinery from the Reliance stable in Jamnagar, which along with the existing 33-million metric tonne per annum (mmtpa) RIL refinery, is now the world’s largest refinery complex, with an aggregate refining capacity of 1.24 million bopd at a single location.

RIL and RPL, which would be exporting most of their products except LPG — which they sell to government-owned refineries — would be keenly watched by its rivals and analysts, as they seek to sell their products in the western markets.

Fortis Healthcare to raise Rs 1,000 crore through rights issue

Fortis Healthcare CEO & MD Shivinder Singh on Christmas day announced plans to raise Rs 1,000 crore through a rights issue.

The money would be used to fund the company’s greenfield projects and restructure the balance sheet, besides being utilised for other investment opportunities.The share ratio and issue price of the rights issue would be finalised by February-end.

The company is setting up a medicity in Gurgaon and three new hospitals in Mumbai, West Delhi and Gurgaon. Fortis’.Last year, Fortis Healthcare raised Rs 496 crore through its maiden public issue and the promoters currently own 74.4% in the company. At present, Fortis Healthcare has 23 hospitals and plans to increase it to 40 hospitals by 2011.


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Cholamandalam DBS to raise Rs 300 cr via preference shares

Cholamandalam DBS said its founders including EID Parry, Coromandel Fertiliser Ltd and DBS Bank would subscribe to 10 million convertible shares, to raise Rs 300 crore.

The preference shares will be issued at Rs 100 each at a premium of Rs 200 and shall be convertible into equity within 18 months, the financial services firm said in a statement to the stock exchange.

The firm had said on Oct 24 it will raise an additional Rs 50 lakh.

LIC's investment in MF's rises 3 folds

After banks, it’s the country’s largest insurer Life Insurance Corporation of India (LIC) that has come to the aid of cash-strapped mutual funds (MFs), which are reeling under redemption pressure on liquid and fixed maturity plans (FMPs).The public-sector insurer has pumped in over Rs 14,000 crore into liquid funds of various fund houses. This is more than three times its investment of around Rs 4,500 crore in such instruments last year.

It could not be ascertained as to how much the corporation has invested in its own mutual fund arm, LIC Mutual Fund.
According to Irda norms, LIC can invest 50 per cent in government securities, 15 per cent in the infrastructure sector, and the remaining 35 per cent in other channels, including equity, mutual funds, fixed deposits, non-convertible debentures, certificate of deposits, and commercial papers.

Liquid or money market funds earn returns in the range of 10-12 per cent. LIC parks money in short- term liquid funds and FMPs, where the average tenure varies from two weeks to a month.

FT picks up major stake in African Bourse

The Financial Technologies India (FTIL) group has inked a deal to acquire 60 per cent stake in Botswana-based Bourse Africa. The latter has been licensed by the Botswana government to set-up a spot and/or derivative multi-asset exchange for trading in commodities, currencies, bonds and diamonds.The remaining equity in Bourse Africa will be held by other African financial institutions, banks, global multi-lateral developmental ventures, exchanges and other strategic investors.

The exchange will have a pan-African presence through the hub-and-spoke model that will connect all major countries in Africa. Operating out of Botswana, Bourse Africa is accredited to the Botswana International Financial Services Centre (IFSC).Other financial services ecosystems that are planned to be set up include a Clearing Corporation, Warehouse Receipt Corporation and Depository services.

Read more in The Business Standard article.

Blackstone’s NCC stake-hike plan blocked

The government has blocked private equity firm Blackstone’s plans to hike stake in Nagarjuna Construction Company (NCC) on the grounds that the construction firm has been operating as a ‘foreign-owned Indian holding company’ without prior permission from the Foreign Investment Promotion Board (FIPB).NCC has been asked to first pay a penalty to RBI and then seek a fresh permission from the FIPB to offload an additional 3.5% stake to US-based Blackstone.

The construction company had sought government permission to issue 91 lakh convertible share warrants to Blackstone at a conversion price of Rs 225 each, a deal size of Rs 205 crore. This was the second tranche of investment planned by the private equity firm in the company. In August 2007, Blackstone struck a deal to invest about Rs 616 crore to pick up a 12% stake. This was a two-tiered transaction in which it was to get convertible warrants in the second leg.

Blackstone, however, stands to benefit from the government’s decision to reject the proposed investment. NCC’s stock price has crashed and on Monday closed at Rs 68.55 on the BSE. The private equity firm would not like to pay more than a two-fold premium on the existing stock price while subscribing to the convertible warrants.

According to Press Note 9 guidelines, laid down by the Department of Industrial Policy and Promotion (DIPP), a foreign-owned Indian holding company is a domestic firm in which foreign investment is 51% or more. In NCC’s case, though, the total foreign stake is 30.83% as of August 2008. Of this, Blackstone holds 8.85% as a foreign institutional investor (FII). NCC has RBI’s permission to take FII investments up to 74%.

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Wockhardt in talks to raise $100 mn

Mumbai-based drugmaker Wockhardt, country’s sixth-largest drug maker by revenue is in discussions with ICICI Venture, ChrysCapital and other private equity firms to divest a 15% stake to pay off investors in its $110-million foreign currency convertible bonds (FCCB) issue, which comes up for redemption next year.According to sources Wockhardt is looking to raise $100 million (around Rs 500 crore) from PE funds at nearly triple the premium over its current market price of Rs 96.45 per share.

The firm is looking to sell 15% stake, but is unlikely to get the kind of premium it is looking for. PE firms are looking for a more realistic valuation of the company. Under India’s takeover code, if a single investor buys 15% equity in a company, it has to make an open offer for buying an additional 20%. But if a clutch of investors together buy 15%, the open offer option does not get triggered.Wockhardt’s FCCB issue is due for redemption in October 2009 at a conversion price of Rs 486 per share.

Another option available to Wockhardt is to raise debt, including ECBs, for taking care of the liabilities arising out of FCCB conversion. But the company’s debt obligations are already in the region of Rs 2,800 crore, and with a debt-equity ratio of 2.3:1, its capacity to raise loans could be constrained.

Read more in The Economic Times article.

Railway hikes freight rates by 8% on cement, coal

Indian Railways on Monday hiked the freight rates for cement, coal and coke by up to 8% per tonne. The Railways move would increase the input cost of housing, power and steel sectors that have been identified for special focus by the government. The hike came into effect immediately after the government announced a package to boost the economy.

According to a Railways notification, the classification of cement, coal and coke has moved upwards from class 140 to 150 for train load movement. This translates into higher freight depending on the distance travelled. Coal industry analysts suggest that the increase in freight will hit power generators hard, while for steel producers the increase will be offset by a global decline in coking coal prices. The coking coal is converted into coke for use in the blast furnace for generating liquid steel.

“Cost of thermal coal is less than the transportation cost for state power generators in the northern region, where coal may be transported from about 1,000 to 1,500 kms. Railways freight on coal, typically, costs about Re 1 per tonne per km, which can result up to Rs 1,500, whereas cost of coal is between Rs 500 and 750 (Grade F) thermal coal,” Puneet Goel of KPMG advisory services told ET.For cement industry, the move could lead to an average around Re 1 per bag increase in transportation cost of the construction material, thinning the relief to cement consumers that could result from 4% excise duty cut.

OVL to go ahead with the acquisition Imperial Energy

The union cabinet has accorded its approval to ONGC Videsh Ltd, the overseas investment arm of ONGC, India's largest oil explorer, to go ahead with the acquisition of UK-listed Imperial Energy.

The cabinet committee on economic affirs met Tuesday morning to approve the deal. There is no official word on the government's decision as yet. People who are in the know of the deal said that the cabinet clearance was taken so that OVL could meet the Tuesday midnight deadline set by UK authorities.

This would pave the way for OVL to make the open offer to the UK listed shareholders. The $2.1 billion deal will be one of the bigger deals by ONGC in recent times Imperial Energy has oilfields in Russia. OVL had sought to delay making the open offer but the request was rejected by the Takeover panel on Monday.

Analysts say the deal works out to around $2 to $2.5 a barrel for OVL given Imperial's declared reserves of 900 million barrels and will help improve India's energy security. India meets almost 70% of its oil demand through imports.ONGC is being advised by Deutsche Bank. Merrill Lynch is advising Imperial.

Related story:

OVL may make ‘firm’ offer to Imperial soon
Imperial Energy has choosen OVL over Sinopec

Infrastructure India acquires 49% in Oriental Tollways

Infrastructure India, a London-listed investment fund, is close to acquiring a 49% stake in Oriental Tollways for Rs 450 crore ($90 million).Oriental is part of New Delhi-based privately-owned Bakshi Enterprise.Dabur India vice-chairman Amit Burman is a shareholder in OSE in a personal capacity.

The specialist India-focussed fund will invest in Oriental Tollways through a Mauritius-based subsidiary.Infrastructure India’s mandate is to invest in Indian energy and transport infrastructure projects and comes out of its belief that the present time is appropriate to focus on infrastructure in India given the fast pace of change in its economy.The fund has already invested in Shree Maheswar Hydel Power Corporation, a 400-MW hydroelectric power project located in Madhya Pradesh, among others, in India.

Its investment, which will value Oriental Tollways at Rs 918 crore, comes against a gloomy backdrop for the Indian infrastructure sector, which has, in the past, been hobbled by bureaucratic delays and is now a victim of tight funding conditions amid a global credit crunch, on the whole.

Read more in The Economic Times article.

Merrill Lynch sells stake in Religare

Merrill Lynch has sold its nearly 5% stake in financial services company Religare Enterprises,promoted by Malvinder and Shivinder Singh for an undisclosed sum.Last November Merrill Lynh had bought a 5.56% stake in Religare as part of a pre-initial public offering (IPO) placement.

The one-year lock-in period expired last month, and Merrill Lynch has since sold its post-IPO stake of 4.97%. The buyers of the stake or the price at which it changed hands were not immediately known, although a Religare official said the sale happened last week.

Based on Religare’s average stock price of Rs 299 last week, Merrill Lynch could have cashed out for Rs 113.6 crore, generating a return of 87.5% in one year. Merrill had acquired 5.56% stake in Religare for Rs 60.6 crore last October through its wholly-owned subsidiary Indopark Holdings.

Despite the stock market crash, the scrip is trading much above its IPO issue price of Rs 185. The stock had shot up after listing to touch Rs 729 on the NSE. Promoters currently hold 54% stake in the company.

Stimulus effect: Auto makers slash prices

With government announcing a 4% cut in CENVAT across the board, the Auto industry today announced price cuts across various models and segments. The cut has been in the range of Rs.2000 to Rs.50,000. Rate cut comes as a blessing for the auto industry which has been hit hard by the global recession and a slowdown in the India economy.

Pune-based Bajaj Auto today announced cut in prices of its vehicles by up to Rs 4,400 on account of four per cent reduction in CENVAT.The prices of two-wheelers have been reduced by up to Rs 2,100, while that of three-wheelers have been cut by up to Rs 4,400, Bajaj Auto Ltd (BAL).

Maruti Suzuki said in a statement that the price of its top-end SX4 sedan will go down by Rs.23,000 to Rs.760,542, while the small car Maruti-800 will be cheaper by Rs.6,500 at Rs.193,561. Hyundai Motor, the second largest car maker in the country, has cut the prices of its flagship model Santro (GL) by Rs.8,834 (non AC), while the top-end luxury car Sonata will see a drop of Rs.44,792.The company's new sensation i10 will be cheaper by Rs.11,247 and Rs.18,381 depending on its models.

Toyota Kirloskar said the price of its popular multi-purpose vehicle would be reduced by up to Rs.32,780, while high-end models like Corolla would be cheaper by Rs.40,750.

After Rbi's rate cut, banks announce cut in deposit rates

After Saturdays announcement by RBI of cutting the repo and reverse repo by a 100 basis point, some private sector banks have announced cuts in the deposit rates offered by them.HDFC Bank, the second-largest private bank, has slashed interest rates on deposits.on some of its flagship products, with the reduction being steep for short maturities. The rates for deposits with a maturity of six months and 15 days have been reduced from 10.5% to 8.25%. For nine months and 15 days, the rates are from 10.5% to 9% while for one year and 15 days, they are now 10% from 10.5% earlier. The bank has also slashed the rates for two years and 15 days from 10.5% to 9.5%, making it the first private bank to cut deposit rates after some of the PSU banks cut rates a couple of weeks before. HDFC Bank has also slashed rates on its bulk deposits.

ICICI Bank is yet to take a final decision on rate cuts. Axis Bank is carrying out a review and may take a decision soon.IndusInd Bank’s will review its decision to cut deposit rates next week. For the past few weeks, it has been offering 11% for 200 days, 400 days and 1,000 days.Yes Bank on Saturday said that it has reduced its prime lending rate by 0.50 per cent with effect from December 8.The bank's PLR accordingly stands reduced to 16.5 per cent from the earlier 17 per cent.

The State Bank of India on Friday said it will consider rate cut after the Reserve Bank of India announces reduction in benchmark rates.SBI has already reduced benchmark lending rate by 75 basis points to 13 per cent, beginning last month. Most PSU banks have slashed deposit rates from December 1. They have done away with the special offer of 10.5% on deposits. The country’s largest bank, State Bank of India, offers 10% for 1,000 days. Corporation Bank has decided to offer a maximum rate of 9.5% for 1-3 years, Union Bank will offer a maximum rate of 10.05% for seven years and 9.5% for one-seven years.

Govt announces the much awaited fiscal stimulus package

Indian government today announced the much awaited fiscal stimulus package for the economy.

The following are the highlights of the fiscal stimulus package unveiled by the government Sunday to contain the impact of global
financial crisis on the Indian economy:

- Plan, non-plan expenditure of Rs.300,000 crore (Rs.3,000 billion/$60 billion) in four months

- Parliament nod to be sought for Rs.20,000 crore more toward plan expenditure

- Across-the-board cut of four percent in the ad valorem central value-added tax

- Interest subvention of two percent on export credit for labour intensive sectors

- Additional allocations for export incentive schemes

- Full refund of service tax paid by exporters to foreign agents

- Incentives for loans on housing for up to Rs.500,000, and up to Rs.2 million

- Limits under the credit guarantee scheme for small enterprises doubled

- Lock-in period for loans to small firms under credit guarantee scheme reduced

- India Infrastructure Finance Co allowed to raise Rs.100 billion through tax-free bonds

- Norms for government departments to replace vehicles relaxed

- Import duty on naphtha for use by the power sector is being reduced to zero

- Export duty on iron ore fines eliminated

- Export duty on lumps for steel industry reduced to five percent

RBI cuts Repo and Reverse Repo

RBI on saturday cut its repo and reverse repo rate by 100 bps to 5% and 6.5%, signaling banks to cut their lending rates.
Following are some of the key take aways from the RBI's announcement on Saturday

Ø RBI cuts reverse repo and repo rates by 100 bps

Ø SIDBI and NHB are being given liquidity support to the extent of Rs.7000 crore and Rs.4000 crore to provide liquidity support both SME segment as well as Housing Finance companies

Ø FCCBs are now being allowed to be bought back by Indian corporates, basically issuers out of their own dollar resources raised through ECB or FCCB

Ø Loans granted to HFCs to fund less than Rs 20 lakhs of housing dwelling units, would be classified under the priority sector lending

ØDecided to extend exceptional/ concessional treatment to the commercial real estate exposures which are restructured up to June 30, 2009

Ø Second restructuring done by banks of exposures (other than exposures to commercial real estate, capital market exposures and personal/ consumer loans) up to June 30, 2009, will also be eligible for exceptional regulatory treatment.

Sources:GE India to acquire Indo Tech transformers

Indo Tech Transformers, part of the Rs 240 crore Indo Tech group, is soon t be acquired by General Electric India for an undisclosed sum. The buy will help GE, known to acquire to grow in its important markets, strengthen its manufacturing presence in the power sector.

Indo-Tech has a good profit track record. In the first half of this year, it clocked a 43% rise in net profit at Rs 24.63 crore against Rs 17.14 crore in the same period last year. Net sales increased to Rs 119.38 crore ( Rs 90.75 crore). During 2007-08, it reported a net profit of Rs 39 crore on net sales of Rs 189.86 crore.As on March 31, 2008, it has reserves and surplus of Rs 112 crore on a thin equity of Rs 10.62 crore in which the promoters hold 54.34%, institutions 18% and public the rest.

In the last one month, the company's share price soared by 34.69% from Rs 184.95 on November 1st to the current price of Rs 249.10. According to the company's stock archive on the BSE, the total number of trades for the months from July to October 2008 was over 15,000. But in the month of November alone, the stock was traded 15,000times.

Read more in The Economic Times article.

Germany's MAN to be 50:50 partner in Force Motors JV

Force Motors Ltd today announced that it would sell up to 14.50 per cent stake in its auto components joint venture with German truckmaker MAN for about 3 bn rupees, sending the former's shares up.MAN would acquire additional equity in the joint venture to increase its stake to 50 percent, via a rights issue for up to 2.5 bn rupees.

Force Motors currently holds 70 percent stake in the JV, MAN Force Trucks Pvt Ltd, while the German firm holds the rest.The joint venture would start designing and make trucks and bus chassis over the next few months to widen its footprint in the Indian market.

Force Motors will reduce its stake in the heavy commercial vehicle joint venture with MAN Nutzfahrzeuge to 50% from the current 70%.Force will sell 14.2% stake to MAN for Rs 300 crore. Later, MAN will infuse Euro 40 million (around Rs 250 crore) in the JV through subscription of a rights issue. Force will refrain from subscribing to the issue. As a result, MAN’s stake will go up to 50% from the current 30%.

The transaction, which is to be completed over the next few weeks, will peg the enterprise value of the JV at Rs 2,000 crore. Both the parties have signed the deal on Tuesday in Munich.

Hedge funds lose $170 billion in third quarter

The hede fund industry lost nearly a tenth of its size as it was caught between biggest outflows since 2005 and worst performance in 10 years. Global hedge fund assets shrunk 8.8% to $1.63 trillion on September 30, 2008, from $1.8 trillion on June 30. The size of the industry is further expected to shrink to $1 trillion.

Tough times for the hedge fund industry began with the unravelling of the short financials and long commodities trade, where in the hedge funds sold US financial stocks and bought commodities.Changes in margin requirements and other trading rules by US regulators triggered the unwinding of this trade which saw crude prices drop from $ 148 levels to below $100 in a flash causing serious dent in assets of many hedge funds.

The industry had received inflows in the first two quarters of the year, though the inflows have been falling gradually over the previous four quarters.In the quarter ending June, $4.03 billion came into hedge funds.However the reversal in the third quarter has taken the overall flows for the year into negative for the first time in three years. At nearly $12 billion, the outflows in 2008 is already threefold larger than the last negative reading in December 2005, with three months to spare.

RBI eases lending norms for urban co-op banks

The Reserve Bank of India (RBI) has relaxed lending norms for tier-II urban co-operative banks (UCBs), making it easier for them to lend to commercial real estate and non-banking finance firms (NBFCs).The central bank has rationalised and reduced the standard asset provisioning requirements for tier-II UCBs from 1 to 2 per cent earlier to 0.40 per cent across sectors. It has also slashed risk weights on lending to various sectors.

The provisioning norm in case of direct advances to agriculture and SME sectors, however, is kept unchanged at 0.25 per cent.
According to a central bank circular today, loans and advances to commercial real estate will now attract a risk weight of 100 per cent as against the earlier 150 per cent.

The banking sector regulator has allowed UCBs to fund only asset-financing NBFCs and the risk weight on exposure to such companies remains unchanged at 100 per cent.For tier-I UCBs, the general provision norms on all their standard assets have been kept unchanged at 0.25 per cent.

On November 15, RBI had reduced the standard asset provisioning requirements of banks lending to NBFCs to 0.40 per cent from 2 per cent, except in the case of direct advances to agriculture and SME sectors, where the provisioning requirement remains at 0.25 per cent.Similarly, the central bank had also reduced banks’ risk provisioning for commercial real estate loans to 100 per cent from 150 per cent.

Actis to pump in $1 bn in India in 3-4 yrs

Despite the terror attacks in Mumbai on 26th November 2008, Actis is going ahead with its plan of investing Rs.5000 crore in the next 3-4 years. The firm continues to be positive on the India's growth potential.

A pioneer in management buyouts, Actis has been a consistent private equity investor in India for over 10 years.Over this period Actis has worked in partnership with a number of promoters and management teams to create tremendous value for their businesses.Actis has successfully closed its 2.9 billion dollar PE fund - Actis Emerging Markets 3 (AEM3)- which exceeded the target of 2.5 billion dollar. AEM3 included commitments from a diversified group of 100 investors from across the globe, including a number of first time investors in emerging markets.

Read more in The Economic Times article.

Auto sales for November down

Economic slowdown seems to have taken a toll on the Auto sector as well. Auto companies today reported their monthly sales figure, with all the top auto makers reporting disappointing set of figures.

India's leading car maker Maruti Suzuki sales declined 24.3 per cent in November this year compared to sales in the same month last year.The company sold 52,711 vehicles in November this year as compared to 69,699 in the like period a year ago.

Company's volumes in the domestic sedan segment, called the A3 segment, which comprises SX4, Esteem and Swift D'zire models, grew by 40.3 per cent from 4,260 cars in November last year to 5,975 this year.

The sales in the high-end small car segment, called the A2 segment, comprising Alto, Wagon-R, Zen, Swift, and A-Star models declined 26.6 percent from 47,641 in 2007 to 34,976 this year.

Tractor major Mahindra and Mahindra too announced that it will it could cut down productions and temporarily shut plants due to slowdown in sales in domestic as well as overseas markets.

The economic turmoil has cast its spell on country's oldest automobile company Hindustan Motors too, with sales of Ambassador cars dipping by more than 33 per cent in the past few months.A company official told reporters that Amby sales which were in the region of 900 cars per month have come down to 600 units now.

74 cos in BSE 500 have FCCBs outstanding of $10.9 bn

The Economic Times quoted a recent Edelweiss report which highlights that at the end of Sep 30, 2008, 74 companies in the BSE 500 Index had FCCBs outstanding aggregating
$10.9 billion.

The brokerage house estimates that for 61 companies (including Ashok Leyland and India Cements) the probability of FCCBs being converted into equity is low, given the gap between current stock prices and effective conversion price.

Edelweiss also pointed out that currently, most companies do not charge redemption premium to the Profit & Loss account on the assumption that bonds will finally be converted into equity shares. Hence, in the event of non conversion, a significant cost is kept off the P&L and profits are overstated to that extent.