Optional Fully Convertible Debenture (OFCD)

OFCD is a type of debt security where the option is given to the holder if he wants to convert his debenture into equity share after stipulated time .

This instrument does not yield interest in the initial period of say, 6 months. After this period option is given to the holder of OFCDs to apply for equity at a "premium" for which no additional amount needs to be paid. The option has to be indicated in the application form itself. However, interest on FCDs is payable at a determined rate from the date of first conversion to the second / final conversion and in lieu of it, equity shares are issued.

SEBI recently charged the Sahara Group for disguising its prospectus for the OFCD issue as a draft red herring prospectus(DRHP), as it had contained the details of price and quantum of the issue amont other things.

1 comment:

  1. What are the key differences between an OFCF and convertible notes