Login
NCDs

Who We Are

NCDs, or Non-Convertible Debentures, are a type of debt instrument issued by corporations, financial institutions, and government entities to raise funds from the public. Debentures are essentially debt securities that represent loans given by investors to the issuing entity. The "non-convertible" aspect means that NCDs cannot be converted into equity shares of the issuing company, unlike convertible debentures which can be converted into shares at a later date.

Here are some key features of NCDs:

  1. Interest Payment: NCDs carry a fixed interest rate, known as the coupon rate. The issuing entity makes periodic interest payments to the debenture holders at predetermined intervals (e.g., annually, semi-annually).

  2. Maturity Period: NCDs have a specific maturity period, which is the time frame over which the issuing entity will repay the principal amount to the debenture holders. Maturity periods can vary, ranging from a few months to several years.

  3. Credit Rating: NCDs are typically rated by credit rating agencies based on the issuer's creditworthiness. Higher-rated NCDs generally offer lower interest rates but are considered less risky.

  4. Liquidity: NCDs can be bought and sold on the secondary market before their maturity date. However, the liquidity of NCDs can vary, and investors might need to consider market conditions when selling them before maturity.

  5. Secured and Unsecured NCDs: NCDs can be secured or unsecured. Secured NCDs are backed by specific assets of the issuer, which can be sold to repay debenture holders in case of default. Unsecured NCDs don't have specific collateral backing.

  6. Redemption: At the end of the maturity period, the issuing entity repays the principal amount (face value) to the debenture holders.

  7. Taxation: The interest earned from NCDs is subject to taxation as per the income tax laws of the country. Tax rates can vary based on factors such as the holding period and the investor's tax bracket.

  8. Risk: While NCDs are generally considered less risky compared to equity investments, they still carry some level of risk. Investors should assess the creditworthiness of the issuing entity and consider the potential impact of interest rate changes on their investment.

  9. Market Fluctuations: The market value of NCDs can fluctuate based on changes in interest rates and credit risk perceptions. If interest rates rise, the market value of existing NCDs may decrease.

  10. Call and Put Options: Some NCDs come with call or put options. A call option allows the issuer to redeem the NCD before maturity, while a put option gives the debenture holder the right to sell the NCD back to the issuer before maturity.

Investing in NCDs can be suitable for investors looking for fixed income instruments and who are willing to hold the investment until maturity. However, potential investors should carefully review the terms and conditions of NCD offerings, assess the financial health of the issuing entity, and consider their own investment objectives and risk tolerance. If you are interested in investing in NCDs, it's advisable to seek advice from financial professionals and perform due diligence.