Investing in NCDs

A non-convertible debenture is a fixed income instrument where the issuer agrees to pay a fixed rate of interest to the investor. An NCD cannot be converted into equity of the issuing company unlike convertible debentures.NCDs are good substitutes for fixed deposits,especially company deposits.

Debentures are of two types secured and unsecured. The debentures with a “charge” on the assets of the issuer are called secured debentures. So in case of a default by the issuer, the secured debenture holders are paid by selling the assets against which the charge was created. Secured NCDs offer lower interest than their unsecured counterparts. Read more of this post