VALUING COMPULSORILY CONVERTIBLE DEBENTURES

 Example
 Issue price of CCD – Rs. 500
 Par value of CCD – Rs. 500
 Issue date – 1 Jan 2014
 Convertible portion
 50% of the par value convertible
 Conversion date – 1 Jul 2015

 Conversion price – Rs. 25 per share (CMP – Rs. 22.5 per share)
 Conversion ratio – 10:1

 Interest rate – 8% p.a. payable semi-annually

 Non-convertible portion to be redeemed in two equal instalments at the end of 4 and 5 years.
 Expected return on debt – 10%
 Expected return on equity – 15%
 Tax rate – 30%
CF2, PGP1, TERM 3, IIMU 1
VALUING COMPULSORILY CONVERTIBLE DEBENTURES

COMPULSORILY CONVERTIBLE DEBENTURES EXAMPLE - VALUE TO INVESTOR

Rs
Interest Redemption Equity shares Total

Value to investor 99 163 225 487

Discount rate/ Rate of return 10.0% 10.0% 15.0% 10.2%
01-Jan-14 - - - (500.00)
30-Jun-14 20.00 - - 20.00
31-Dec-14 20.00 - - 20.00
30-Jun-15 20.00 - 277.21 297.21
31-Dec-15 10.00 - - 10.00
30-Jun-16 10.00 - - 10.00
31-Dec-16 10.00 - - 10.00
30-Jun-17 10.00 - - 10.00
31-Dec-17 10.00 125.00 - 135.00
30-Jun-18 5.00 - - 5.00
31-Dec-18 5.00 125.00 - 130.00
CF2, PGP1, TERM 3, IIMU 2
VALUING COMPULSORILY CONVERTIBLE DEBENTURES
COMPULSORILY CONVERTIBLE DEBENTURES EXAMPLE - COST TO ISSUER
Rs
Interest (post- Redemption Equity shares Total
tax)
Cost to issuer 7.6%
01-Jan-14 - - - 500.00
30-Jun-14 (14.00) - - (14.00)
31-Dec-14 (14.00) - - (14.00)
30-Jun-15 (14.00) - (277.21) (291.21)
31-Dec-15 (7.00) - - (7.00)
30-Jun-16 (7.00) - - (7.00)
31-Dec-16 (7.00) - - (7.00)
30-Jun-17 (7.00) - - (7.00)
31-Dec-17 (7.00) (125.00) - (132.00)
30-Jun-18 (3.50) - - (3.50)
31-Dec-18 (3.50) (125.00) - (128.50)
CF2, PGP1, TERM 3, IIMU 3