Non-Convertible Debentures (NCDs) :

Non-Convertible Debentures (NCDs) are fixed income instruments issued by companies to raise funds from the public. Unlike Convertible Debentures, NCDs cannot be converted into equity shares of the issuing company at a later date. NCDs have a fixed maturity period, ranging from one to ten years, and offer a fixed rate of interest to investors.

NCDs are typically rated by credit rating agencies based on the issuing company’s financial performance and creditworthiness. Higher-rated NCDs are considered less risky, and investors can expect lower returns compared to lower-rated NCDs, which carry higher risk but offer higher returns.

NCDs can be secured or unsecured. Secured NCDs are backed by the company’s assets, which means that in the event of default, investors can recover their investment by selling the company’s assets. Unsecured NCDs, on the other hand, are not backed by any assets, which means that investors may lose their investment in the event of default.

One of the advantages of investing in NCDs is that they offer higher returns than traditional bank deposits. Additionally, NCDs are traded on stock exchanges, allowing investors to liquidate their investments before maturity. However, investors should carefully evaluate the risks associated with NCDs and seek professional advice before investing.

In conclusion, Non-Convertible Debentures can be an attractive investment option for investors looking for fixed income instruments with higher returns than traditional bank deposits. However, investors should carefully evaluate the risks associated with NCDs, including credit risk, liquidity risk, and interest rate risk, and diversify their portfolio to minimize risk.