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Group 7

FCCB JUXTAPOSED FCEB

FCCB:- A foreign currency convertible bond (FCCB) is a type of corporate bond issued by an Indian listed company in an overseas market

FCEB:- It is a bond expressed in foreign currency issued by an Issuing Company and subscribed to by a person who is a resident outside India in foreign currency

Difference between FCCB and FCEB

ISSUER COMPANY

VENTURE CAPITAL FLAVOUR

NIGGLING DOUBTS: FCEB has been launched at the time when stock market was on its low which is not favorable to all equity instruments. Promoter companies may be loath to offload their holdings as they may not be ready to double in as venture capitalists. This is not there in case of Indian investors such as Tata could have acquired Corus by mobilizing its funds as it takes five years for redemption. In India the minimum maturity of the Foreign Currency Exchangeable Bond shall be five years for purposes of redemption.

UNAPPETISING PROSPECTSThe issuing company has the unappetizing prospect of losing grip on the offered company then the foreign investment may have back off. As the shares that they get can best be uploaded in the Indian stock exchange whereas in case of FCCB the existing possibility of exchanging if for ADR/GDR ADR/GDR enjoys two-way fungibility.

Currency War

The phenomenon of countries entering into competitive depreciation of their currencies to retain their hold in export markets.Brazil's finance minister, Guido Mantega, has said that an "international currency war" is going on. He said, "We're in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness.

The main culprit in this conventional view is China, although the International Monetary Fund is a close second.

A "currency war" is more of a political than an economic condition.. An important tension factor in United States is its unhappiness with Chinas undervalued Yuan. U.S. and other countries accused china for keeping its currency at lower level for sustain its booming export-led growth.

IMF, which usually forces countries to devalue their currencies, is asking China to revalue

The Purchasing Power Parity theory is no more a feasible concept now.

Britain, France and U.S. refrained from devaluing their currencies.Currency policies- Federal Reserve announcing quantitative easing. Nobel laureate, Robert Mundell identified the impossible trinity- independent monetary policy, a liberal capital account, managed exchange rates.

Chinese banks got too greedy and brought their financial systems a virtual halt in 2007. Debt problem creation- Western banks role Tailpiece? Toss a coin!

FDI & FII

FDIInvesting in India

Automatic Route Automatic Route Automatic RouteGeneral Rule General Rule General Rule

Prior Permission Prior Permission Prior Permission (FIPB) (FIPB) (FIPB)By Exception By ExceptionPrior Government Prior Government Approval needed. Approval needed. Decision generally Decision generally within 4-6 weeks within 4-6 weeks

No prior permission No prior permission No prior permission required required required Inform Reserve Bank Inform Reserve Bank Inform Reserve Bank within 30 days of within 30 days within 30 days ofof inflow/issue of shares inflow/issue shares inflow/issue ofof shares

FDI Investment SectorsProhibited Sectors : Atomic energy Arms and ammunition Aircraft and warships Coal ligniteRestricted Sectors : Retail I.T Oil & Energy Power sector Pharmaceuticals & Chemicals

4/10/2012

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STATEMENT ON RBIS REGIONAL OFFICE-WISE (WITH STATE COVERED) FDI EQUITY INFLOWSRank 1 2 3 4 5 City MUMBAI NEW DELHI BANGALORE CHENNAI HYDERABAD Percentage 25.14% 22.68% 7.03% 6.69% 4.12%

67 8 9 10 11 12 13 14 15 16 17

AHMEDABADKOLKATA CHANDIGARH PANAJI KOCHI BHOPAL BHUBANESHWAR JAIPUR KANPUR GUWAHATI PATNA RBIS REGIONS NOT INDICATED

2.84%1.63% 0.91% 0.43% 0.24% 0.23% 0.21% 0.15% 0.04% 0.03% 0.00% 27.63% 49070.1 US $ (in million)

GRAND TOTAL (from April 2000 to November 2007)1515 Source:-RBI's - Region-wise inflows, furnished by RBI, Mumbai

FDI Equity/Route Limit in IndiaFDI equity limit-Automatic route Insurance 26% Domestic airlines 49% Telecom services- Foreign equity 74% Private sector banks- 74% Mining of diamonds and precious stones- 74% Exploration and mining of coal and lignite for captive consumption- 74%

Factors affecting FDI

Profitability Costs of production Economic Conditions Government policies Political factors

FIIForeign Institutional Investors (FIIs) are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme (PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India

The registration process for FII

Source:- SEBI (FII) Regulations, 1995

LIST OF COMPANIES

List of companies in which FII investment is allowed upto 30% of their paid up capital under PIS1 2 3 4 5 6 7 Asian Paints (India) Ltd Capital Trust Ltd Container Corporation of India Divis Laboratories Ltd Ferro Alloys Corporation Ltd Garware Polyester Ltd GIVO Ltd (formerly KB & T Ltd)

89 10

Infotech Enterprises LtdMahindra Gesco Developers Ltd Orchid Chemicals and Pharmaceuticals Ltd

List of companies in which FII investment is allowed upto 40% of their paid up capital under PIS1 2 3 4 5 6 7 8 9 10 Adlabs Films Ltd. Aftek Infosys Ltd. Balaji Telefilms Ltd. Bharat Forge Ltd Burr Brown (India )Ltd Cipla Ltd. Elbee Services Ltd Glenmark Pharmaceuticals Ltd Gujarat Ambuja Cements Ltd HEG Ltd

List of companies in which FII investment is allowed upto 49% of their paid up capital under PIS1 Alok Industries 2 3 4 5 6 7 8 9 10 Auribindo Pharma Ltd. Arvind Mills Ltd Bajaj Hindustan Ltd Balakrishna Industries Ltd Blue Dart Express Ltd Core Projects & Tech Ltd CRISIL Digital GlobalSoft Ltd. Dr. Reddys Laboratories Ltd.

FIIs may invest in: securities in the primary and secondary markets (shares, debentures, warrants of listed and unlisted companies) units issued by domestic mutual funds dated Government securities derivatives traded on a recognized stock exchange commercial paper debt instruments provided a 70/30 equity/debt ratio is maintained23

4/10/2012