The Return of the FCCB: India’s Convertible Capital Story from 2015 to 2026

As Indian companies increasingly look to global capital markets to finance expansion, acquisitions and balance-sheet growth, Foreign Currency Convertible Bonds are once again attracting attention. The evolution of the market over the past decade, however, suggests that the next generation of FCCBs will be very different from the last.

Foreign Currency Convertible Bonds (“FCCBs”) occupy a distinctive position in the corporate financing landscape. They begin life as foreign-currency debt but provide investors with the ability to participate in the future equity upside of the issuer through conversion into shares.For Indian companies, this combination can be compelling. An FCCB may offer access to international capital, potentially lower financing costs than conventional debt and the possibility of deferring equity dilution. For investors, it combines a debt instrument with exposure to the issuer’s equity story.

India’s relationship with FCCBs, however, has historically been complicated. The period between 2015 and 2026 tells a broader story about the evolution of Indian corporate finance itself: from dealing with the consequences of an earlier wave of aggressive foreign-currency borrowing to the emergence of larger, more sophisticated Indian companies capable of accessing global pools of capital. As India enters a new phase of corporate investment and international expansion, the question is whether FCCBs are positioned for a meaningful revival.

2015–2017: Living with the Legacy of the First FCCB Cycle

By 2015, the Indian FCCB market was still carrying the consequences of the issuance boom that preceded the global financial crisis. During the earlier cycle, Indian companies had raised substantial amounts through FCCBs on the expectation that rising share prices would result in conversion into equity. In many cases, however, the underlying shares subsequently traded below their conversion prices.

The expected equity conversion therefore did not occur. Companies that had viewed FCCBs as relatively inexpensive capital suddenly faced substantial redemption obligations denominated in foreign currency. Currency depreciation compounded the problem for certain issuers.

The result was a wave of restructurings, maturity extensions, refinancing exercises and negotiations with bondholders. This experience established one of the most important lessons in convertible financing: an issuer should structure an FCCB not merely on the assumption that it will convert, but on the assumption that it may have to be redeemed.

For much of the 2015–2017 period, therefore, the Indian FCCB story was as much about resolving the legacy of the previous cycle as it was about raising new capital.

2018–2019: A More Disciplined Market Emerges

As legacy FCCB exposures were progressively addressed, the market began to reset. The instrument had not disappeared. Instead, it had become more selective. Indian companies considering FCCBs increasingly had to demonstrate stronger balance sheets, credible growth strategies and sufficient equity-market liquidity to attract sophisticated international investors.

The regulatory architecture governing overseas borrowing was also evolving. FCCBs have historically operated within India’s broader external commercial borrowing framework, while their equity conversion features bring additional foreign investment, corporate and securities-law considerations into play. This makes an FCCB fundamentally different from a conventional loan.

A transaction may simultaneously involve foreign-exchange regulations, corporate approvals, securities regulation, stock-exchange requirements, foreign investment rules and the requirements of the overseas market in which the bonds are offered or listed. The complexity is not incidental to the product. It is part of its architecture.

2020–2021: The Pandemic and the Global Convertible Opportunity

The COVID-19 pandemic produced an unusual global financing environment. Companies required liquidity, while extraordinarily low global interest rates encouraged investors to search for instruments offering both downside protection and potential equity upside. Convertible bonds benefited globally from this environment.

For Indian issuers, the period reinforced the strategic possibilities of accessing international capital markets. Companies looking to finance expansion, refinance existing liabilities or strengthen their balance sheets had an incentive to examine alternatives to conventional bank borrowing and immediate equity issuance. The fundamental attraction of an FCCB remained unchanged.

If the issuer’s share price performs strongly and the bonds convert, the company may effectively have raised equity capital while initially accessing funds on debt-like terms. If conversion does not occur, however, the instrument remains a foreign-currency liability that ultimately needs to be serviced or refinanced. That dual character is both the FCCB’s principal attraction and its principal risk.

2022–2024: Higher Interest Rates Change the Calculation

The global financing environment changed substantially from 2022 onwards. Interest rates rose sharply across major economies. The cost of conventional international borrowing increased, currencies became more volatile and investors became more selective. For Indian companies, these conditions made the structuring of overseas borrowings considerably more important.

Convertible instruments can become particularly relevant in such an environment because the equity option embedded in the bond can influence the economics of the financing. Investors may accept financing terms that differ from conventional unsecured debt in exchange for the potential opportunity to participate in future equity appreciation.

But the calculation is highly issuer-specific. A company contemplating an FCCB must consider the relationship between the conversion price and its prevailing share price, the potential dilution to existing shareholders, the maturity profile of the bonds, foreign-exchange exposure and its ability to meet redemption obligations if conversion does not occur. The lesson from India’s earlier FCCB cycle remains particularly relevant: a low coupon should never be mistaken for low financial risk.

2025–2026: A New Window for Convertible Capital?

By 2025, the economic environment surrounding Indian corporate fundraising had changed considerably from a decade earlier. Indian companies were pursuing increasingly ambitious capital expenditure programmes, acquisitions and international expansion strategies. At the same time, the depth and international visibility of India’s public equity markets had increased significantly. This creates potentially favourable conditions for convertible capital.

For listed companies with credible growth prospects and sufficient trading liquidity, an FCCB can provide access to investors who evaluate the issuer through both a credit and an equity lens. Importantly, India’s broader external commercial borrowing framework has itself continued to evolve. The regulatory changes introduced in 2026 represent a significant recalibration of the ECB regime, including changes concerning eligible borrowers, recognised lenders, borrowing limits, end-use flexibility and conversion mechanics. FCCBs continue to sit within this broader foreign borrowing architecture, while retaining their distinct equity-conversion characteristics.

This changing regulatory environment could make the coming years particularly important for the Indian international debt and equity-linked capital markets.

Why Companies Are Reconsidering FCCBs

The strategic attraction of an FCCB lies primarily in flexibility. A conventional bond remains debt. A conventional equity issuance results in immediate dilution. An FCCB creates a pathway between the two.

For a company whose management believes that its current market valuation does not fully reflect its future growth prospects, issuing immediately dilutive equity may be unattractive. A convertible structure can allow the company to raise capital while potentially setting conversion at a premium to the prevailing market price.

If the company’s equity value subsequently increases sufficiently, investors may convert and the debt disappears from the balance sheet in exchange for equity. If the share price does not perform as expected, however, the issuer remains responsible for the debt. This is why the most important question in an FCCB transaction is not simply:

“At what price will the bonds convert?” It is equally:“What happens if they do not?”

The Anatomy of a Modern Indian FCCB Transaction

An FCCB issuance by an Indian listed company is typically a multi-jurisdictional capital-markets exercise. Depending on the structure, the transaction may require consideration of board and shareholder approvals, the Companies Act, foreign-exchange regulations, the ECB framework, foreign investment rules, SEBI regulations and applicable stock-exchange requirements.

The transaction documentation may include the subscription agreement, trust deed or fiscal agency agreement, offering documentation, agency arrangements and other ancillary agreements. Where the securities are listed internationally, the rules of the relevant overseas exchange and clearing systems may also become relevant.

The conversion mechanism itself requires careful attention. Conversion price adjustments, anti-dilution protections, corporate actions, change-of-control provisions, events of default, early redemption rights and tax considerations can materially affect the economics of the instrument.

An FCCB should therefore be viewed not simply as a financing transaction, but as a transaction at the intersection of debt capital markets, equity capital markets and cross-border regulatory law.

The Risks Have Not Disappeared

The renewed attractiveness of FCCBs should not obscure their inherent risks. The most significant is refinancing risk. If the company’s share price remains below the effective conversion price as maturity approaches, bondholders may elect not to convert. The issuer must then be prepared to redeem or refinance the bonds.

Foreign-exchange movements can further increase the economic burden of repayment. There is also potential dilution risk. If the company’s shares perform strongly and the bonds convert, existing shareholders may experience dilution. Companies therefore need to model multiple scenarios before launching a transaction.

From an investor perspective, credit quality, liquidity of the underlying shares and enforceability of contractual protections remain critical. These risks do not necessarily make FCCBs unattractive. They make disciplined structuring essential.

From Opportunistic Financing to Strategic Capital

The most significant development in India’s FCCB market may ultimately be the changing profile of the Indian issuer. The Indian corporate landscape of 2026 is materially different from that of the earlier FCCB boom.

A growing number of Indian companies operate internationally, undertake cross-border acquisitions and have access to global institutional investors. Indian equity markets have also become considerably deeper and more visible to international capital. For this new generation of companies, FCCBs need not be regarded merely as inexpensive foreign debt. Used appropriately, they can form part of a broader capital strategy that combines domestic equity, conventional debt, overseas borrowing and equity-linked instruments.

The market is therefore unlikely to return to the indiscriminate FCCB issuance witnessed in earlier cycles nor should it. The more interesting possibility is the emergence of a smaller but considerably more sophisticated market.

Looking Ahead

The history of India’s FCCB market from 2015 to 2026 is ultimately a history of institutional learning. The first phase was dominated by the consequences of an earlier issuance boom. The second involved restructuring, regulatory evolution and a more cautious approach to foreign-currency borrowing. The third may now be beginning.

With Indian companies requiring increasingly large pools of capital and international investors seeking exposure to India’s growth story, convertible capital could once again occupy an important place in corporate financing.

But the success of the next FCCB cycle will depend on whether issuers apply the lessons of the last one. The strongest transactions will be those structured around both possibilities inherent in every convertible bond: successful conversion and full redemption.

The FCCB may be returning. This time, however, the Indian market is approaching it with considerably more experience.

Last Updated on 17 July, 2026