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Investors can hold on to their convertible debentures and continue to receive fixed interest payments at the rate of 2% per year until the debt matures and the company returns their principal.
Partially convertible debentures (PCDs) involve redeeming a fraction of the value of the security for cash and converting the other part into equity. A fully convertible debenture (FCD) involves a full conversion of the debt security into equity at the issuer's notice.
Later, the company issues the NCDs through a public issue that remains open for a specific period, similar to IPOs. The process of how to buy non-convertible debentures requires the investors to login into their online stock broking account and place a buy order to buy NCD online.
What are the main differences between NCDs and CCDs? NCDs provide fixed returns without an option for conversion into equity, while CCDs offer potential equity conversion at a predetermined time, combining debt and equity features.
A compulsory convertible debenture is a bond that must be converted into stock at its maturity date. For companies, it allows for repayment of debt without spending cash. For investors, it offers a return in interest and, later, ownership of shares in the company.
Secured Debentures: Secured debentures are that kind of debentures where a charge is being established on the properties or assets of the enterprise for the purpose of any payment. The charge might be either floating or fixed. ... Unsecured Debentures: They do not have a particular charge on the assets of the enterprise.
The following are the types of convertible debentures. Fully Convertible Debenture. ... Partially Convertible Debenture. ... Conversion Price. ... Conversion Ratio. ... Quantum of Conversion. ... Convertible Value. ... Time of Conversion. ... Coupon.
Fully Convertible Debenture: These are debentures in which the whole value of debentures can be converted into equity shares of the company. Partly Convertible Debenture: In this kind of debentures, only a part of the debentures will be eligible for conversion into equity shares.