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As any foreign investor will know, India has an
ever-changing regulatory framework, as well as a currency,
which is not freely convertible. The result of this is that the
markets and investors have developed various hybrid instruments
with contractual rights to provide desired returns and economic
requirements, while being compliant with Indian regulations.
Partially convertible instruments, which were originally equity
from a foreign investment perspective, have for a long time now
been regarded as debt. Therefore any instrument which fixes the
return, or exits pricing, also runs into regulatory issues. A
permitted and popular instrument is compulsorily convertible
debentures (CCDs) from a foreign direct investment perspective.
These are routinely used by private equity firms, hedge funds
and structured investors investing in India.
So, how does this instrument fare under the...