Non-Convertible Debentures (NCD)

What Is Non Convertible Debentures?

Non-Convertible Debentures (NCDs) are debt instruments issued by companies to raise capital from investors. Unlike convertible debentures, these debt securities cannot be converted into equity shares of the issuing company at a later date. They typically offer a fixed rate of interest over a specified period, making them a relatively predictable income-generating investment. NCDs are generally considered less risky than equity investments but carry a higher risk than government bonds. The credit rating of the issuing company plays a crucial role in determining the risk and the interest rate offered on NCDs. Investors often consider NCDs as a way to diversify their fixed-income portfolios and potentially earn higher returns compared to traditional fixed deposits.

Benefits of Non Convertible Debentures.

• Fixed and Predictable Income.
• Higher Interest Rates Compared to Traditional Fixed Deposits.
• Diversification of Fixed Income Portfolio.
• Liquidity (Depending on the Issue).
• Variety of Tenures and Issuers.
• Potential for Capital Appreciation (in some cases).
• Credit Rating as a Risk Indicator.
• Regular Interest Payouts.