Amidst the global financial turbulence, the Indian corporate sector is also haunted by a specter called FCCB meltdown. FCCBs (Foreign Currency Convertible Bonds) are debt instruments issued in the currency different from the issuer's domestic currency. These instruments come with an embedded call option and with an option to be converted into equity at a predetermined price (known as conversion price) at a future date. During their heydays, Indian corporates raised huge money through these bonds.

As per the RBI data, nearly 156 Indian companies raised $20 bn during the last four years through the FCCB route, raising India's overall foreign debt by 65% since 2003. Out of this, about $13.5 bn is still outstanding, while the remaining got converted into equity. With the global financial crisis hitting the Indian stock markets and the companies' forex earnings hard, many companies that raised funds through the FCCB route, suddenly find themselves in an uncomfortable position.

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