India
Foreign investors still appear to have an appetite for Indian foreign currency convertible bonds. Several Indian FCCBs issued early this year are trading at a discount in the secondary market. A $100 million convertible bond offering by Indian pharmaceutical company Wockhardt received a healthy response from European and offshore US hedge fund investors in mid-September. Around the same time, another Indian company, Sterling Biotech, sold $70 million of convertibles and four others – Sun Pharmaceuticals, Larsen & Toubro, United Phosporous and Orchid Chemicals – could come to market later this year.
The five-year Wockhardt bonds were priced with a coupon/yield to maturity of 5.25% and a conversion premium of around 50% to the company's share price in the local market. The company exercised the $10 million greenshoe option and the bonds will be listed in Hong Kong.
One of the largest Indian exporters of generic bulk drugs, Wockhardt plans to use the cash to acquire companies in Europe, its largest market. In May this year it acquired German company Esparma for $11 million, the company's third foreign acquisition after UK-based CP Pharmaceuticals last year and Wallis Laboratory in 1998.
Record issuance
Last year's spectacular rise in Indian equity prices, the Indian government's decision to ease restrictions on foreign currency borrowing by Indian companies in January and a Moody's upgrade to investment grade for Indian foreign currency debt has led to record issuance of convertibles by Indian companies.