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Non convertible debentures

manpreet.kaur (Student) (184 Points)

05 October 2012

WHAT ARE THE CONDITIONS FOR A PUBLIC COMPANY FOR RAISING NON-CONVERTIBLE DEBENTURES THROUGH A FOREIGN SOURCE ???

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4 Replies

RAMESH CHANDRA SHARMA (munka istentisztelet) (899 Points)
Replied 05 October 2012

ITS AN EXTERNAL COMMERCIAL BORROWING.......ISNT IT....

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Smriti Dhawan (Company Secretary ) (347 Points)
Replied 05 October 2012

Company can only issue non-convertible, optionally convertible or partially convertible for issue of which funds have been received on or after May 1, 2007 are considered as debt. Accordingly all norms applicable for ECBs relating to eligible borrowers, recognized lenders, amount and maturity, end-use stipulations, etc. shall apply.

RAMESH CHANDRA SHARMA (munka istentisztelet) (899 Points)
Replied 05 October 2012

I THINK THIS MIGHT BE HELPFULL.....

/editor_upload/697448159ecb guidelines rbi 2013.pdf

(Guest)

Under Foreign Institutional Investors (FII) route, any private or public company could list its privately placed Non Convertible Debentures (NCD’s) on the wholesale debt market segment of any recognized stock exchange. Any FII or any sub-account of an FII entity could then purchase these NCDs on the floor of the stock exchange. Entities of offshore realty funds may have their own FII registration or register as a sub-account to an existing FII to purchase the NCDs.

For an exit, these debentures may be sold on the floor of the stock exchange, but most commonly these NCDs are redeemed by the issuing company.

So long as the NCD are being offered on private placement basis, the process of offering and listing is fairly simple without any onerous eligibility conditions or compliances.

Whilst creation of security interest is not permissible with Compulsory Convertible Debentures (CCD’s) under the FDI route, listed NCDs can be secured (by way of pledge, mortgage of property, hypothecation of receivables etc.) in favor of the debenture trustee that acts for and in the interest of the NCD holders.

Since NCDs are subscribed to by an FII entity under the FII route and not under the FDI route, the restrictions applicable to FDI investors (such as the minimum area requirements, minimum capitalization requirements, lock-in requirements etc.) are not applicable to NCD holders.