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Boom-era quick-fund deals turn sour for cos

Economic Times – MUMBAI: Away from the media glare, many Indian companies are in the midst of bitter negotiations with foreign private equity investors and hedge funds, which had put money in these firms in the hope of making a killing.

These investors came in droves around 2006 and early 2007, buying an instrument called cumulative convertible preference shares (CCPs), which the Indian companies, mostly unlisted, had issued to get quick money and side-step regulations on foreign investment.

Billions of dollars changed hands at boom-era valuations, as local firms promised the investors an easy exit through the stock market. The deal was simple: CCPs had a tenure of three years, offered a fixed interest, and at the end of three years, could either be redeemed to pay back investors or be converted into shares, which could be sold once the company got listed.

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