Ranbaxy Laboratories [Get Quote], which was taken over by Japanese pharma major Daiichi Sankyo, has become the first Indian company to reset the conversion price of its foreign currency convertible bonds.

The price has been cut 39 per cent to Rs 555.85 from Rs 908 per share originally after its request to redeem the bonds ahead of maturity was rejected by the Reserve Bank of India [Get Quote].

The new conversion price is, however, more than three times the current market price of Rs 180.15. Should bond holders not accept the new conversion price -- which investment bankers say is unlikely -- the company will have to repay $558 million or Rs 2,845 crore in 2011 at the current exchange rate. Bond-holders have 30 days to accept the new price.

The new price was arrived after adjusting for the equity dilution from fresh shares issued to Daiichi Sankyo on a preferential basis, the average price of the previous six months or six weeks, and factoring the advancement of the conversion date through a complex formula, said Malvinder Singh, chairman and managing director, Ranbaxy Laboratories.

"Since the management has changed, under the agreement with the bond-holders, the company needs to give them the option to either redeem or convert their bonds now. The conversion price needs to be adjusted and fixed in the current market after considering all factors," said another senior official.

The company had raised an FCCB for $440 million in March 2007.