Spoke on 30 April 2026 in a TaxTonic webinar with Taxsutra, hosted by Sachin Sastakar, dissecting convertibles from a commercial use case perspective and mapped from a regulatory and tax perspective. The framing was a CRT stress test. Commercial drives the deal. Regulatory shapes the structure. Tax decides the cost. The key is to balance the three aspects, not in a sequence, but as a parallel approach.
The same instrument wears different hats under different frameworks. A CCD is debt under Companies Act, equity under FEMA NDI, interest-deductible under tax, and equity under IndAS. Each hat carries its implications – for example, an OCRPS may be treated as a part of regulatory net worth, but may impact the debt equity ratio, since a part of OCRPS is treated as a financial liability.
Eight commercial use cases and the hybrid solution for each of the use cases were discussed. The attached slide captures the essence of what was discussed in this webinar.
The thesis is that the three disciplines (i.e., commercial, regulations, and tax) are not independent. Each failure compounds the others, and the compounding shows up at issuance itself, but gets doubly compounded at exit. Treading a thin line across the CRT waterfall is the key to optimizing a convertible instrument.