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.
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