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CS Professional · Strategic Management and Corporate Finance · Foreign Funding - Instruments, Laws and Procedures

Sundaram Industries issued 2,000 FCCBs of USD 1,000 each, convertible at the holder's option at a conversion price of Rs 500 per share, with a fixed conversion rate of Rs 80 per USD. If all bonds are converted, how many equity shares will be issued?

3,20,000 shares will be issued. The issue of USD 20,00,000 converts to Rs 16 crore at Rs 80 per USD, and dividing by the Rs 500 conversion price gives 3,20,000 equity shares on full conversion.

  1. A4,00,000 shares
  2. B3,20,000 sharesCorrect
  3. C2,50,000 shares
  4. D1,60,000 shares

Explanation

Total issue is 2,000 x USD 1,000 = USD 20,00,000. At Rs 80 per USD this is Rs 16,00,00,000. Dividing by the conversion price of Rs 500 gives 3,20,000 shares. Check: 3,20,000 x 500 = Rs 16 crore. The 4,00,000 option wrongly uses Rs 100 per USD, and 1,60,000 wrongly divides by Rs 1,000.

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