Foreign Currency Convertible Bonds or FCCBs are fast turning into millstones around the necks of Indian companies compounding their woes brought on by tight liquidity and crimping demand.

Riding high on soaring equity values and a firm rupee, India Inc has raised nearly $20 billion through foreign currency convertible bonds or FCCBs. Indian firms raise foreign currency denominated funds in the form of external commercial borrowings (ECBs) or FCCBs.

Among BSE-100 companies, 18 have FCCBs outstanding worth $4.63 billion. Stocks like Suzlon and Ranbaxy trade at steepest discounts.

“Wockhardt is the first big FCCB to come for conversion. It will appoint merchant banker for restructuring FCCBs in coming weeks,” said Habil F Khorakiwala, chairman Wockhardt.

At the current steep discounts, few investors in FCCBs would look to convert that leaves promoters with few options like revision of conversion prices like Ranbaxy did or extend the tenure with sops.

In a tight liquidity scenario, where debt financing is not easily forthcoming and is pricey when available, equity financing is virtually a closed window. Corporates are going to find the going tough on meeting FCCB redemptions.

The flipside of revision in conversion prices could spell large equity dilution, clearly India Inc finds itself caught between a rock and a hard place.