The Reserve Bank of India (RBI) has announced the extension for the buyback of foreign currency convertible bonds (FCCBs) issued by various companies. A 9 months extension has been given after taking into account the fragile equity market which has resulted into trading with high discounts on the bonds.

However, experts are of the view that the decision won’t have much effect as most of the bonds will mature in the coming 12 months.

A market analyst stated that the bondholders probably would not sell at discount as most of their bonds maturity would be near. It will be advantageous for the companies whose bonds had matured and they might not buyback due to funding concerns.

The bondholders have options either they can convert the bonds into equity shares, if only the price at the time of maturity is more than the pre-pay price or they keep going for regular interest payments.

According to the new guidelines, “the companies would be able to prepay or buyback the bonds under the ‘automatic’ route in addition to the approval route”. Also, the companies will be allowed to purchase the bonds in advance at 8% discount from its original price.