Question: Can Convertible Debentures Be Redeemed?

Can debentures be redeemed before maturity?

When the total amount of debentures is paid to the debenture holders in lump-sum on maturity or even before maturity, it is known as Redemption of debentures in lump-sum..

What is the face value of a debenture?

The par or face value of a debenture is: A. The amount that debenture holders will receive on maturity of the debenture. … The amount that a debenture holder would be prepared to pay for a debenture when the coupon rate is below the interest rate the debenture holder considers appropriate.

How does a convertible debenture work?

Convertible debentures are hybrid products that try to strike a balance between debt and equity. Investors gain the benefit of fixed interest payments while also having the option to convert the loan to equity if the company performs well, rising stock prices over time.

Can debentures be redeemed at discount?

No, debentures issued at premium or par cannot be redeemed at discount because redemption of debentures at discount implies that the debentureholders are getting lesser than what they have earlier invested at the time of issue.

Why do companies issue convertible debentures?

Companies issue convertible bonds to lower the coupon rate on debt and to delay dilution. A bond’s conversion ratio determines how many shares an investor will get for it. Companies can force conversion of the bonds if the stock price is higher than if the bond were to be redeemed.

Who can issue convertible debentures?

Only companies dealing in infrastructure projects, non-Banking Financial Companies, Infrastructure Debt Fund and companies permitted by central Government or Ministry or RBI can issue secured debentures for more than 10 years and less than 30 years.

What are the risks of a debenture?

The main risk that fixed-rate debentures and unsecured notes holders are exposed to is the opportunity cost that a better rate of return may be available elsewhere if interest rates were to increase. The credit risk is the risk that the investor’s interest and/or capital are not repaid by the borrower.

Why are convertible bonds attractive to investors?

By this logic, the convertible bond allows the issuer to sell common stock indirectly at a price higher than the current price. From the buyer’s perspective, the convertible bond is attractive because it offers the opportunity to obtain the potentially large return associated with stocks, but with the safety of a bond.

What is debenture and its characteristics?

Characteristic or Features of a Debenture It is issued under the company’s seal. It is one of a series issued to several lenders. It usually specifies a particular period or date as the date of repayment. It generally creates a charge on the undertaking of the company or some parts of its property.

Can compulsorily convertible debentures be redeemed?

When they are issued it is a debt, after a period of time / milestone, it shall be compulsorily converted into shares. … Section 71 of the Act states that a company could issue debentures with an option to convert into shares either wholly or partly at the time of redemption.

Is it safe to invest in non convertible debentures?

NCDs from one single sector (NBFCS that focuses on personal loans) are not safe to invest in. This can lead to higher risk exposure. d. NCDs from the secondary markets have always delivered higher returns in the past.

What happens when a convertible note matures?

Maturity Date: Convertible notes carry a maturity date, at which the notes are due and payable to the investors if they have not already converted to equity. … The most common method of conversion occurs when a subsequent equity investment exceeds a certain threshold. This is called a qualified financing.