subject: Rbi Directed To Cos Including Realty Firms That Obtained Funds Via Convertible Papers [print this page] Mumbai : About a dozen companies,mostly in the real estate sector, have been told by the Reserve Bank of India (RBI) to restructure the deals they have cut with foreign investors.
These local firms have recently brought in foreign direct investment (FDI) by selling convertible papers notes that will convert into shares after a date to offshore funds and strategic players.
A customary practice among foreign private equity funds and overseas investors is to link the number of shares on conversion to the performance of companies in which they invest.A company which does well has to convert less shares than one which misses performance milestones.In other words,promoters of firms that have performed badly will suffer a significant dilution in their holdings.
In the last three weeks,RBI has written to several companies,asking them to spell out the exact number of shares against convertibles they have issued.These firms are in a spot because the money from foreign investors has already come in.
The central banks letters are in response to the standard forms submitted by companies a month after issuing securities to non-resident investors, Companies receiving foreign investment have to spell out transaction details like identity of investors,size of the investment and conversion terms in these forms,known as FC-GPR filings.
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