Cos underperforming due to FCCB heat

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS FCCB cannot be repriced further: Uttam Galva ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets BSE | NSE 10/02/12 Other Stocks in this news Bajaj Hindusthan | Amtek Auto | Firstsource Solutions | Megasoft | Bharati Shipyard | Hotel Leela Venture | Ranbaxy Laboratories | Mahindra and Mahindra | Tata Motors | Suzlon Energy | Subex |

Some stocks are under performing because of FCCB, or Foreign Currency Convertible Bond, pressure.

 

Here is a verbatim transcript of Varinder Bansal's comments on CNBC-TV18. Also watch the accompanying video.

 

The important thing to consider here is the maturity date, even as some stocks are feeling the pinch even more due to the FCCB conversion price being way higher than the current market price (CMP). In most of these stocks' cases, the CMP is almost 50-70% higher than the CMP. The maturity of many FCCBs is expected in 2009, which is likely to peak in 2010-2011.

 

The promoters are left with two options. One is to reset the conversion price, which could dilute the promoters' holdings. Two - redeem the bonds, which could increase the debt obligations. Also, the company will need to have the money to do that.

 

Here is a list of shares that are under pressure along with their FCCB conversion prices, CMPs and their maturity dates.

 

FCCBs: Conversion to market prices (Rs/sh)

                                    Conversion      CMP    Maturity date

Subex Azure                  897.6                85        2012

HCC                              341.7                74        2011

Bajaj Hind                      621                   106      2011

Amtek Auto                    616                   175      2011

Firstsource                     128                   35       2012

 

FCCBs: Companies under pressure (Rs/sh)

                                    Conversion      CMP

Megasoft                        115                   55         Sep 2008

Bharati Shipyard             505                   235       Dec 2008

 

FCCBs: Companies with maturity dates in 2008

                                    Conversion      Maturity date

Megasoft                       Rs 115              Sep 2008

Bharati Shipyard            Rs 505              Dec 2008

 

FCCBs: Other companies under pressure

Hotel Leela

Ranbaxy

M&M

Tata Motors

Suzlon