Non-Convertible Debentures (NCDs)
The NCDs are one type of debenture instrument used by certain corporates to raise money from the public for a specific duration and pays fixed interest for the same. The investors are also able to generate fixed income from their investment. The risk factor of this instrument is also very low/moderate. On maturity the principal amount along with the accumulated interest amount is paid to the holder. Since these debentures are listed on the stock exchanges, the holder can also sell them like any equity share, prior to its maturity.
Any company willing to bring out an NCD has to get the same rated by a rating agency like; CRISIL, CARE, ICRA, and Fitch. These ratings show the safety level of an NCD, thereby helping the investors in deciding which NCD to be invested in. A higher rating would mean that the issuer has the ability to service its debts on time and carries low default risk.
With the kind of volatility the equity market has witnessed in the recent times, NCDs have emerged as one of the best solution that instills investors’ faith. It is a highly favored form of instrument for investment when the equity market is on a bearish run.
Following are some of the features of an NCD :