6.3 Company debentures

6.3 COMPANY DEBENTURES

Debentures are debt instruments issued by a company to raise funds from investors.

They are usually issued for a fixed term and carry a specified interest rate, known as the coupon rate, which is paid to debenture holders periodically.

Debentures are typically unsecured, meaning they are not backed by specific assets of the company. However, some debentures may have security or collateral attached to them, known as secured debentures.

Types of debentures

1. Secured debentures: These debentures are backed by specific assets of the company.
2. Unsecured debentures: They are not secured by any specific assets. In case of default, the debenture holders have a claim on the general assets of the company.
3. Convertible debentures: These debentures can be converted into equity shares of the company at a predetermined conversion ratio and within a specified time period.
4. Non-convertible debentures: These debentures cannot be converted into equity shares and remain as fixed-income instruments until maturity.