What is Non Convertible Debentures ?
Non-Convertible Debentures (NCDs): Corporate fixed-income tools for steady returns. Get regular interest + principal at maturity—no equity conversion. Beats bank FDs; check ratings for safety.
Example
Invest ₹1,00,000 in an NCD at 9% for 3 years: Earn ₹9,000/year interest, get ₹1,00,000 back at end. Ongoing 2026 issues include XXXShares (maturity Dec 2026) and YYY at 9.6% (AA-rated)
Security Structure
Divided into secured (asset-backed, like property or machinery as collateral) and unsecured (trust-based on issuer credit). Secured NCDs rank higher in repayment priority during defaults.
Issuance Features
Issued via public offers or private placement, listed on exchanges (NSE/BSE) for tradability. Features cover credit ratings (e.g., AAA safest), interest payout frequency (monthly/quarterly), and call/put options (early redemption rights).
Eligibility to invest in Non-Convertible Debentures (NCDs) in India is categorized by SEBI guidelines into three main investor classes, ensuring broad access while protecting retail participants.
Category I: Institutions
Public financial institutions, banks (commercial/co-operative), provident/pension funds, insurance companies, mutual funds, and SEBI-registered venture capital/alternative investment funds can invest without limits.
Category II: Non-Institutions
Companies, registered societies/bodies corporate, public/private charitable trusts (if authorized by trust deed), partnership firms (in partners' names), and LLPs qualify here.
Category III: Individuals
Resident Indians and Hindu Undivided Families (HUFs) via Karta; NRIs may invest on non-repatriation basis if the issuer allows (check prospectus, as US-based NRIs often restricted)
Ineligible Investors
Foreign nationals, FPIs, OCIs (except permitted NRIs), minors, and those ineligible under statutory rules cannot participate.
Does Rating matter ?
Mandatory by SEBI, ratings from agencies like CRISIL, ICRA, or CARE signal default risk—AAA offers highest safety/lowest risk, while BB or below indicates high default potential. Higher ratings mean safer investments but lower yields; they guide better decisions and assure repayment reliability.
Rating Scale Overview
Ratings range from AAA (safest) to D (default), with modifiers (+/-) for finer gradations within categories like AA or A.
