November 11, 2025
7 mins read
[translate:A Foreign Currency Convertible Bond (FCCB) is a debt paper. A company issues it in a currency that is not its own.] It is part loan and part chance to own company shares.
[translate:FCCBs are special because they mix two things.] They pay fixed interest, like normal bonds. But bondholders can also turn them into company stock later. They convert at a set price.
These bonds usually sell on world stock exchanges. They reach global investors. These investors might not look at the company otherwise. Companies use FCCBs to raise money from abroad. They do this without giving up ownership right away.
[translate:FCCBs are set in world money, like the US dollar, euro, or yen.] This lets companies get money from other countries. It also lets investors deal with global currency changes.
Investors can swap their bonds for company shares after some time. This swap is their choice. It depends on what the investor wants and how the company’s stock is doing.
FCCBs pay a set interest rate. Interest is paid regularly. This lasts until the bond is paid back or turned into stock. This gives the investor a steady money flow.
These papers usually last for three to seven years. This time frame allows enough room for the debt to be paid back. It also gives time for the possible stock conversion.
Most FCCBs are bought and sold on global exchanges. This makes them easier to see. It also makes them clearer and easier to trade for foreign investors.
The bonds have a set conversion price. This price is often higher than the stock price when the bond is sold. This price plan makes converting smart if the stock value later rises.
If investors choose not to convert, the bonds are paid back at full price. This happens when the bond ends. This works as a safe option, like paying back a normal loan.
The company leaders do not lose ownership right away, as conversion is not forced. Company ownership is cut only when bondholders choose to change their bonds into stock.
[translate:Foreign Currency Convertible Bonds act as mixed papers.] They are part loan and part stock option. A company sells them in foreign money to get world investors. They also offer a set interest payment.
Bondholders get interest payments often. When the bond ends, they can get their money back. Or they can turn the bond into shares at a fixed price. This choice makes FCCBs useful.
The choice to convert depends on the stock price. If the market price is higher than the bond conversion price, investors may convert. If it is lower, they usually ask for their money back.
So, FCCBs change with market needs. Investors get safety from fixed payments. They also get a chance to profit if the company does well. The company gets foreign funds without giving up ownership fast.
Via Global Brokers - Investors with international trading accounts can access FCCBs listed on foreign exchanges through recognised brokerage platforms.
Through International Mutual Funds - Some international mutual funds and bond funds may include FCCBs in their portfolio, offering indirect exposure.
By Participating in Issuance - Qualified institutional buyers or foreign investors may participate directly in new FCCB issuances subject to applicable regulations.
Using Depository Accounts - FCCBs may be held in international depository accounts in line with custodian requirements and market practices.
Complying with KYC Norms - Investors need to complete relevant Know Your Customer (KYC) formalities and adhere to local regulations before investing.
Monitoring Currency Exposure - Investors must account for potential currency risk and evaluate whether hedging strategies are required based on their exposure.
Bondholders get fixed interest payments. This gives them steady money during the bond’s life.
If the stock price goes over the conversion price, investors can switch. They change from debt to stock. They profit from the stock's higher value.
Investors gain exposure to foreign money moves. This can work well for them when markets change.
FCCBs are often sold abroad. This gives global investors easier access and more ways to trade.
Companies avoid cutting ownership right away. It only happens if bondholders decide to convert.
FCCBs allow foreign investors to join Indian companies. They do not have to worry about local money changes as much.
They are sold in foreign money. If local money gets weaker, the company pays more to settle the debt.
The conversion choice only works if the stock price is higher than the conversion price.
Issuing the bond means following rules from RBI, SEBI, and world exchanges.
Legal and listing fees for FCCBs are often higher than for local loans.
Investor interest, big economic changes, and global market feelings can all change the price and the chance to convert.
Indian companies often use FCCBs when interest rates abroad are lower than in India. This lets them get world money. It also delays giving up ownership.
But issuing them is not easy. RBI and SEBI put rules on how the FCCB money can be spent. Usually, it can be used for building assets or buying companies abroad.
Sectors like tech, building, and manufacturing use FCCBs often. Their success depends a lot on exchange rates, stock price changes, and investor demand.
For companies, checking costs, currency risk, and payback duties is vital. This must happen before they decide to sell FCCBs.
| Feature | FCCBs | Domestic Convertible Bonds |
| Currency | Issued in foreign currency | Issued in domestic currency |
| Investor Base | Targeted at foreign investors | Targeted at domestic investors |
| Listing | Often listed on international exchanges | Listed on local stock exchanges |
| Interest Payment | Made in foreign currency | Made in domestic currency |
| Conversion Option | Into equity of the issuing company | Into equity of the issuing company |
| Regulatory Framework | Subject to international and local regulations | Subject to domestic regulations |
| Hedging Requirement | May require currency hedging by the issuer | Generally, no currency risk is involved |
| Use of Funds | Usually for global expansion or foreign operations | Usually for domestic use or operational funding |
| Redemption Risk | Depends on foreign exchange movement and stock price | Depends mainly on domestic financial performance |
| Administrative Cost | Higher due to cross-border regulatory compliance | Lower compared to FCCBs |
Foreign Currency Convertible Bonds balance debt with the chance of stock. Investors get steady income. They also keep the option to change the bonds to shares if the stock does well.
For companies, FCCBs open the door to world money. They also allow them to wait before cutting ownership. This flexibility is useful. But it brings extra costs, rules, and currency risk.
In India, RBI and SEBI rules guide the sale of FCCBs. Use varies by industry and market time. But this tool is still important for getting money from outside the country.
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An FCCB is issued in a foreign currency and typically listed on an international exchange, whereas traditional convertible bonds are issued in domestic currency and follow local market norms.
FCCBs provide fixed interest income with an option to convert into equity, offer currency diversification, and are listed on global platforms for broader access.
Investors can access FCCBs through global brokers, international funds, or by participating in new issues, subject to eligibility and regulatory compliance.
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