Billionaire Anil Ambani's Reliance Communications, India's No.2 mobile carrier, has a $925 million U.S. dollar convertible bond maturing in March at a conversion price of Rs 654 - more than nine times its current stock price.

With India's economic growth buckling and the rupee at an all-time low, other companies, too, are expected to struggle to meet debt obligations in the coming months.

Seeking to finance acquisitions and their aggressive expansion, Indian companies raised funds through foreign currency convertible bonds (FCCBs) and bank loans before the financial crisis struck in 2008.

Many of those debts need to be repaid next year, and the timing could hardly look any worse.

The Indian rupee has nosedived and is Asia's worst performing currency this year, and the stock market has dropped by more than a fifth, making it even tougher for debt-laden companies already reeling under weak business growth.

"It's a very tricky situation for Indian companies. If any default it will have an horrendous domino effect in the country," said Nathalia Barazal, a Geneva-based portfolio manager for convertibles at Lombard Odier Darier, who owns $34 million worth of Indian engineer and builder Jaiprakash Associates' $354.5 million convertible bonds that mature in September next year.

"Lots of firms rushed to convertibles markets thinking it's a cheaper funding option," she said. "I'm not positive on all Indian convertibles, but I hope some would find ways to restructure or, in a worst case, sell assets to pay debt."

Reliance Communications' investors are unlikely to convert their holdings into equity as the stock price has halved this year to below 71 rupees. Shares in the company - which has reported eight straight quarterly profit falls and had net debt of $6.5 billion at end-September - were trading at about 410 rupees when the company issued the bonds in February 2007.

The cost of insuring against debt default at the company through credit default swaps (CDS) has risen 515 basis points this year to 945 basis points, or $945,000 a year to insure every $10 million in debt.

Reliance Communications is looking to sell its telecoms tower unit, which could bring in more than $3.5 billion, media has reported, noting the company has had exclusive talks with private equity firms Blackstone Group LP and Carlyle Group

BONDS OUT OF MONEY

More than two dozen companies on the BSE-500 index face FCCB redemption worth 330 billion rupees ($6 billion) by the end of the next fiscal year in March 2013, according to research by Indian brokerage Edelweiss.

The convertible bonds are too expensive at current levels to be converted into stocks, and the weaker rupee, which slumped to an all-time low of 54.30 to the U.S. dollar on Thursday, will leave issuers with a heavy redemption burden.

The rupee has lost close to a fifth of its value since July, and is adding to a growing sense of economic crisis in India.

"Given the current state of markets, FCCB conversion into equity shares won't happen, and even refinancing would be difficult," said Deepak Chokhani, India equity capital market director for Royal Bank of Scotland.