Non-Convertible Debentures: A Non-convertible debentures (NCD's) is a debt instrument with a fixed tenure, issued by companies to raise money for business. Unlike convertible debentures, NCD's cannot be converted into shares of the issuing company. NCDs assure fixed returns after an agreeable tenure. When it comes to raise long term funds NCDs might be your best pick. With investors turning risk averse and looking for stabilized as well as guaranteed returns, NCDs appeared to be preferred investment avenue for them. Higher credit rating further ensures minimal default risk.
Benefits of investing in NCD's:
Better Returns: NCD's provide a higher rate of interest for investors. While banks offer 9% to 10% on fixed deposits, NCD's offer above 11% of the
Good Liquidity: To sell NCDs, investor has two options. Sell on the Stock Exchanges and Exercise the Put /Call option
Taxation: NCDs are not subjected to TDS. No such taxes on interest earned are applicable when securities are issued by a company in a dematerialized (Demat) form and listed on a stock exchange.
NCDs can be easily liquidated: In case of NCDs you have an option to either sell on the National Stock Exchange or an option of a premature exit.