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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 PROSPECTS

The 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 The phenomenon of countries entering into competitive depreciation competitive depreciation of their currencies of their currencies to retain their hold in export marketsto retain their hold in export markets..

Brazil's finance minister, Guido Mantega, Brazil's finance minister, Guido Mantega, has said that an "international currency war" has said that an "international currency war" is going on. He said, "We're in the midst of is going on. He said, "We're in the midst of an international currency war, a general an international currency war, a general weakening of currency. This threatens us weakening of currency. This threatens us because it takes away our competitivenessbecause it takes away our competitiveness..

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

A "currency war" is more of a political than A "currency war" is more of a political than an economic condition. an economic condition.

. An important tension factor in United . An important tension factor in United States’ is its unhappiness with China’s States’ is its unhappiness with China’s undervalued Yuan. undervalued Yuan.

U.S. and other countries accused china for U.S. and other countries accused china for keeping its currency at lower level for keeping its currency at lower level for sustain its booming export-led growth.sustain its booming export-led growth.

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

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

Britain, France and U.S. refrained from Britain, France and U.S. refrained from devaluing their currencies.devaluing their currencies.

Currency policies- Federal Reserve Currency policies- Federal Reserve announcing quantitative easing.announcing quantitative easing.

Nobel laureate, Robert Mundell Nobel laureate, Robert Mundell identified the impossible trinity- identified the impossible trinity- independent monetary policy, a independent monetary policy, a liberal capital account, managed liberal capital account, managed exchange rates. exchange rates.

Chinese banks got too greedy and Chinese banks got too greedy and brought their financial systems a brought their financial systems a virtual halt in 2007.virtual halt in 2007.

Debt problem creation- Western Debt problem creation- Western bank’s rolebank’s role

Tailpiece? Toss a coin!Tailpiece? Toss a coin!

FDI & FII

FDIFDI

Automatic RoutePrior Permission

(FIPB)

Investing in India

General RuleNo prior permission requiredInform Reserve Bank within 30 days ofinflow/issue of shares

By ExceptionPrior Government Approval needed.Decision generally within 4-6 weeks

Automatic Route


Prior Permission(FIPB)Automatic Route


By ExceptionPrior Government Approval needed.Decision generally within 4-6 weeks

Prior Permission(FIPB)

Automatic Route


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FDI Investment Sectors FDI Investment Sectors

Prohibited Sectors :Prohibited Sectors : Atomic energyAtomic energy Arms and ammunition Arms and ammunition Aircraft and warshipsAircraft and warships Coal ligniteCoal lignite

Restricted Sectors : Retail I.T Oil & Energy Power sector Pharmaceuticals &

Chemicals

Source:-RBI's - Region-wise inflows, Source:-RBI's - Region-wise inflows, furnished by RBI, Mumbaifurnished by RBI, Mumbai

STATEMENT ON RBI’S REGIONAL OFFICE-WISE (WITH STATE COVERED) FDI EQUITY INFLOWS

Rank City Percentage

1 MUMBAI 25.14%

2 NEW DELHI 22.68%

3 BANGALORE 7.03%

4 CHENNAI 6.69%

5 HYDERABAD 4.12%

6 AHMEDABAD 2.84%

7 KOLKATA 1.63%

8 CHANDIGARH 0.91%

9 PANAJI 0.43%

10 KOCHI 0.24%

11 BHOPAL 0.23%

12 BHUBANESHWAR 0.21%

13 JAIPUR 0.15%

14 KANPUR 0.04%

15 GUWAHATI 0.03%

16 PATNA 0.00%

17 RBI’S REGIONS NOT INDICATED 27.63%

GRAND TOTAL (from April 2000 to November 2007)1515

49070.1 US $(in million)

FDI Equity/Route Limit in India FDI Equity/Route Limit in India

FDI 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 FDIFactors affecting FDI

ProfitabilityProfitability Costs of productionCosts of production Economic ConditionsEconomic Conditions Government policiesGovernment policies Political factorsPolitical factors

FIIFIIForeign 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 FIIThe 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 PIS

1 Asian Paints (India) Ltd

2 Capital Trust Ltd

3 Container Corporation of India

4 Diviâ€™s Laboratories Ltd

5 Ferro Alloys Corporation Ltd

6 Garware Polyester Ltd

7 GIVO Ltd (formerly KB & T Ltd)

8 Infotech Enterprises Ltd

9 Mahindra Gesco Developers Ltd

10 Orchid Chemicals and Pharmaceuticals Ltd

List of companies in which FII investment is allowed upto 40% of their paid up capital under PIS

1 Adlabs Films Ltd.

2 Aftek Infosys Ltd.

3 Balaji Telefilms Ltd.

4 Bharat Forge Ltd

5 Burr Brown (India )Ltd

6 Cipla Ltd.

7 Elbee Services Ltd

8 Glenmark Pharmaceuticals Ltd

9 Gujarat Ambuja Cements Ltd

10 HEG Ltd

List of companies in which FII investment is allowed upto 49% of their paid up capital under PIS

1 Alok Industries

2 Auribindo Pharma Ltd.

3 Arvind Mills Ltd

4 Bajaj Hindustan Ltd

5 Balakrishna Industries Ltd

6 Blue Dart Express Ltd

7 Core Projects & Tech Ltd

8 CRISIL

9 Digital GlobalSoft Ltd.

10 Dr. Reddyâ€™s Laboratories Ltd.

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FIIs may invest in:FIIs may invest in:• securities in the primary and securities in the primary and

secondary markets (shares, secondary markets (shares, debentures, warrants of listed debentures, warrants of listed and unlisted companies)and unlisted companies)

• units issued by domestic mutual units issued by domestic mutual fundsfunds

• dated Government securitiesdated Government securities• derivatives traded on a derivatives traded on a

recognized stock exchangerecognized stock exchange• commercial papercommercial paper• debt instruments – provided a debt instruments – provided a

70/30 equity/debt ratio is 70/30 equity/debt ratio is maintainedmaintained