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16 Oct, 6 tweets, 2 min read
Some material I compiled on FCCB disaster of 2011 for my FACG class.

An old report on companies which had issued FCCBs and how disastrous that decision turned out to be for them.

Link: bit.ly/2Jad7O3
Some quotes from that report:

"Steep INR depreciation has resulted in huge MTM losses, which coupled with redemption premium (generally kept off P&L) will lead to higher effective cost of borrowing through FCCBs."
"FCCBs have become a nightmare for many corporates because of steep fall in stock prices and currency depreciation."
Look at the impact on some of the companies involved
Also see:

personalfn.com/fns/when-fccbs…

and

personalfn.com/fns/when-fccbs…

Also attaching a chart from a different report. It plots the exchange rate at the time a company issued FCCB and what happened subsequently. It was a total disaster.
TODAY it seems like a dumb idea to borrow in foreign currency and not hedge out the currency risk. But here's the question to ask:

Are there are practices that are followed TODAY which will look DUMB to a FUTURE generation?

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More from @Sanjay__Bakshi

Fundoo Professor Profile picture
14 Oct
Help needed! Doing a case on how many Indian promoters of listed companies have lost them because of leverage. Wanted a comprehensive list so thought of asking here. Please give name of promoter and company name. We can go back 10 years for this exercise.
Leverage could be at the company level (think Hotel Leelaventures) and/or promoter level.
Thanks everyone. Lots of responses.
Read 4 tweets
Fundoo Professor Profile picture
15 Jun
Lockdown effect. Down 21 kgs. Fasting, yoga, walking, and sleeping (properly)- four of the oldest practices (think Lindy) that cost nothing but have immense health benefits.
Some ex students and friends really helped me in this project. So grateful to them...
Also enormous help from Obesity code by @drjasonfung. Also Complete Guide to Fasting by him again. Why We Sleep by Mathew Walker. And lots of stuff on biofeedback including @DrInnaKhazan’s wonderful book on the subject. Used a lot of technology for biofeedback too.
Read 4 tweets
Fundoo Professor Profile picture
29 Apr
One way to read this story is to do it while keeping the larger context of “how to make states bow down to you” in mind.
By ceding control over excise tax revenues, thanks to GST, states had already lost much of their “money” power. Now, with no alcohol sales and very little sale of petrol/diesel, they lose the two key sources of revenue (alcohol & petroleum products are outside the preview of GST)
If you control the money, you get the “cooperation” in the “co-operative federalism” one way or another.
Read 4 tweets
Fundoo Professor Profile picture
22 Apr
Supply it for free in hotspots. Lockdown compliance will hugely increase and people will be grateful.
Extract from “Where Good Ideas Come From?” by Steven Johnson: Before the discovery of coffee, much of the world was intoxicated much of the day. This was mostly a health issue. Water was too polluted to drink, so beer was the beverage of choice.
In his New Yorker essay “Java Man,” Malcolm Gladwell explains it this way: “Until the eighteenth century, it must be remembered, many Westerners drank beer almost continuously, even beginning their day with something called ‘beer soup.’
Read 4 tweets
Fundoo Professor Profile picture
15 Mar
I think there are clear policy benefits of wiping out AT-1 bond holders, massively diluting current stockholders, and also because of the lock in period imposed.
I am referring to these three things together because I feel it makes sense to look at the situation in totality, even though your point of disagreement (as of now :-))is about one of those things - the lock in.
By wiping out AT-1 bond holders, massively diluting current stockholders, and by imposing the lock up of shares, the government/RBI are signalling something important. The signal is this:
Read 19 tweets
Fundoo Professor Profile picture
2 Feb
By shifting the burden of tax on dividend from payer to payee the government has, perhaps unintentionally, told companies to cut their dividend payout ratios.
That’s because the difference between the tax rate on dividends and capital gains is now very significant. Therefore, investors should prefer capital gains over dividends. And many (though not all) shareholder-friendly companies should also think similarly.
Dividends are discretionary and the decision makers will not only think of the larger interests of minority stockholders, they would also think of personal interests. For many companies which are controlled by families the personal factor could easily dominate the decision.
Read 9 tweets

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