Non-convertible debentures (NCD) are fixed-income instruments, usually issued by high-rated companies in the form of a public issue to accumulate long-term capital appreciation. They offer relatively higher interest rates when compared to convertible debentures. NCD investment can be held by individuals, banking companies, primary dealers other corporate bodies registered or incorporated in India and unincorporated bodies.
Debentures are long-term financial instruments which acknowledge a debt obligation towards the issuer.
Features of Debenture/NCD
Taxation - No tax is deducted at source as per the provisions of Sec 193 of the IT Act.
- Creadit Rating - Only companies with a good credit rating can issue secured NCDs.
- Interest - Secured NCDs provide a higher NCD interest rate to their investors.
Non-Convertible Debentures (NCDs) are of two types
- Secure NCDs Secured NCDs are considered safer of the two kinds as their issues are backed by the assets of the company. In the event of the company failing to pay on time, then the investors can recover their dues by liquidating the company's assets. However, the interest offered on NCDs is low.
- Unsecure NCDs There is no backing in unsecured NCDs in case company defaults.
