The wind is blowing in the opposite direction for India's largest commercial vehicle manufacturer. Unlike in the past, the company may be forced to raise fresh debts to repay its series of FCCBs taken in the past five years, says a Mumbai-based industry expert.

For the Tata group, this is not an isolated case. The salt-to-software conglomerate has outstanding FCCBs worth $1.87 billion, after it converted about $500 million worth bonds when the market was on a high.

Five group companies, including Tata Motors, Tata Steel [Get Quote], Tata Chemicals [Get Quote], Tata Power [Get Quote] and Tata Tele (Maharashtra), had raised about $2.36 billion through the FCCB route in the past five years.

Most of these bonds are now trading at a significant discount, or well below the conversion price following the economic downturn.

If the share price is below the conversion price during maturity, there is a high probability that the bonds would not get converted into shares and would end up as debt on the company's books, said Prashant Sawant of London-based KNG Securities LLP.

The group's FCCB position is pretty comfortable for 2009 and 2010. Major group companies have to settle $19 million worth outstanding FCCBs in 2009 and $65 million in 2010. But the  scene is not comforatble for the Tatas after two years.

The group companies have to find cash for repaying $419 million and $1.37 billion worth FCCBs with interest in 2011 and 2012, respectively, if the share price is lower than the conversion price, according to analysts from Global Absolute Research.

"Some of the Tata group companies could buy back FCCBs by raising fund through external commercial borrowings (ECB) route. Since the bonds are trading at substantial discounts, buyback will be the right choice at the moment. Tata Capital, which is raising Rs 1,500 crore through issue of Secured Non-Convertible Debentures (NCD), could also help the group companies including Tata Motors to get out of their liabilities," said Sawant.

However, Global Absolute analysts said that Tata Motors and Tata Steel might face difficulties in raising funds, especially for early buyback as the credit crisis had put pressure on corporate lending.

"The debt components in the books of both the companies are higher after the acquisitions like Corus and Jaguar and Land Rover. Since the redemption happens only after two years, both will get some time to breathe," said analysts.

Apart from the Tata Motors' $100 milion FCCBs, which will mature in April 2009, another $125 million offering from Tata Tele is also reaching maturity this year. Of this, only $15 million is the outstanding for Tata Tele and $4 million for the auto-maker. The rest of the bonds are converted when the share price was higher than the conversion price.

For 2010, Tata Chemicals and Tata Power have outstanding bonds worth $50 million and $15 million, respectively. Tata Motors has to settle two FCCBs of $300 million and $119 million in 2011. In 2012, Tata Steel has to settle $875 million FCCB and Tata Motors has $490 million.

The most affected - Tata Motors - is also planning to reset the conversion price of its outstanding FCCBs in tune with the sharp decline in share price. The bonds, which have been issued in various tranches, are currently trading at a discount of 50 per cent to 65 per cent.

All these adjustments are being made because of 'reset clauses' attached to the convertible bonds, according to which the conversion price is revised downward when the company's share price falls below a pre-determined level.

The revision in prices is to ease out the debt burden on the company but it will increase the equity dilution.