Non-convertible debentures fall under the debt category. They cannot be converted into equity or stocks. NCDs have a fixed maturity date and the interest can be paid along with the principal amount either monthly, quarterly, or annually depending on the fixed tenure specified. They benefit investors with their supreme returns, liquidity, low risk and tax benefits when compared to that of convertible debentures.
Example of NCDs: You can invest when the company announces NCDs or purchase after it trades on the secondary market. You must check the company’s credit rating, issuer credibility and the coupon rate of the NCD. It would help if you purchase NCDs of a higher rating such as AAA+ or AA+.
For corporate firms, borrowing is a standard route for accessing funds. Bonds and Non-Convertible Debentures are two different borrowing routes to raise funds. Bonds are usually issued by the government and large corporations, while large public companies issue debentures to raise money from the market.
A bond is a secured investment as collateral. An asset gets pledged here. So, if the issuer fails to repay the amount, the Bond owners can sell the asset and get their funds back. On the other hand, NCDs are usually unsecured. Any assets do not back them, so choosing a credible organisation when investing in debentures is essential.
Health insurance or medical insurance is an agreement wherein an insurance company agrees to compensate the insured for the medical and surgical expenses incurred during the policy tenure.
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