NCD


What are NCD :

Whenever a company wants to raise money from the public it issues a debt paper for a specified tenure where it pays a fixed interest on the investment. This paper is known as a debenture. Some of the debentures are termed as convertible debentures since they can be converted into equity share on maturity. A Non - Convertible debenture or NCD do not have the option of conversion into shares and on maturity the principal amount along with accumulated interest is paid to the holder of the instrument.

There are two types of NCDs-secured and unsecured. A secured NCD is backed by the assets of the company and if it fails to pay the obligation, the investor holding the debenture can claim it through liquidation of these assets. Contrary to this there is no backing in unsecured NCDs if company defaults. Independent rating agencies like ICRA, CRISIL,CARE, FITCH rate the companies as AA or A+.

We Always advise our investors to invest in companies with higher rating and not go solely by the interest rates offered on the debentures.

Following are the points which one should keep in mind before investing in Non- convertible debentures:-

We Advise our Investor to Invest in debentures after  considered there risk-return profile, liquidity preferences and the period for which they want to stay invested.