Active NCD

Bid Time: 10:00 am to 5:00 pm

Note: Cut-off time for online application is 5:00 pm on the closing day (subject to change).

Non-Convertible Debentures (NCD)

To raise the long-term capital for the company, Non-convertible debentures (NCD) are used through the public issue. NCD bonds are debt (financial) instruments packed with a fixed period. The investor once invest in NCD will receive regular interest at a definite rate.

Non-convertible Debenturesin the share market are rated by credit rating agencies. These NCD ratings will help the investors to learn about the company’s history and creditworthiness and how well it is likely to perform in the future. Often the huge companies issue these NCD bonds without offering the option of converting them into equity.

Features of the non-convertible debentures

  • NCD regulator: it is important to learn that non-convertible debenture in India is regulated by DEBENTURE TRUSTEE. The debenture trustees are appointed by the company while issuing the NCD to the investors.
  • Safety: NCD bonds are secured through the issuer company assets. In simple words- An issuing company has to deliver/ complete the debt obligation under any circumstances.
  • Credit-Ratings: Since the NCD issuing companies are not secured by any collateral, they are rated by the credit rating agencies such as CRISIL. This means the company with a good rating can only issue NCD debentures. The credit rating agencies regularly rate these NCD bonds.
  • Liquidity: Non- convertible bonds, most of them, are listed on the stock exchanges. In the dire need of liquidity, NCD bonds can be sold in the market depending on the prevailing interest rate, bond yield, etc.
  • Returns/ Interest rate: NCD interest rates are fixed. Although the returns percentage has an inverse relationship with the credit ratings. E.g. High creditworthy NCD will offer less/ reduced interest rates.

Things to consider before investing in NCDs:

Check company’s background: Make sure you research the company’s history before you invest. Check if the company has raised money in the past and has successfully repaid its debts. It is a good sign if the company has met its obligations. Else, you may want to avoid investing in the company.

Check company’s credit rating: The biggest draw for NCDs is the interest rate offered. However, that should not be the sole reason to invest. It is important that the high interest rate offered by the company is backed by good credit ratings. Study the credit ratings given to the company by different rating agencies such as CRISIL before you make your decision. A higher rating will suggest the company has the ability to repay its loans.

Taxation benefits of NCD debentures:

There are tax benefits if you invest in NCD.

  • The interests earned on the NCD investment, capital gain tax are implicated in it. Hence investor is liable to pay the tax on the NCD earned interest.
  • If the NCD bonds are held in demat form, then it is exempted from the TDS.
  • If the investor falls under a low tax bracket, NCD is the ideal investment product.

FAQs on Non convertible debentures (NCDs):

There are two types of Non-convertible Debentures-

  • Secured NCD: These NCDs are considered safe as the issues are sponsored by the assets of the company. In case the issuing company fails to pay the investor on time, he/she can recover the funds by liquidating/ selling the company assets. The interest rate on the secured NCD is low compare to another type of NCD- unsecured NCD.
  • Unsecured NCD: These NCD bonds contain risk as they are not backed/ sponsored by the assets of the issuing company. By any chance, if the issuing company fails to pay the due to the investor, he/she has to wait to receive the payment as there are no assets available to liquidate/ fund their on-time payments. Although the interest rate of unsecured NCDs is higher than the secured NCD.
  • Fully Convertible Debentures (FCD): These are fully convertible into Equity shares at the issuer's notice. The issuer decides the ratio of conversion. Upon conversion, the investors enjoy the same status as ordinary shareholders of the company.
  • Partly Convertible Debentures (PCD): A part of these instruments are converted into Equity shares in the future at notice of the issuer. The issuer decides the ratio for conversion. This is normally decided at the time of subscription.
  • Optionally Convertible Debentures (OCD): The investor has the option to either convert these debentures into shares at price decided by the issuer/agreed upon at the time of issue.
  • Non Convertible Debentures (NCD): These instruments retain the debt character and cannot be converted into equity shares

Yes, NRIs can invest in non-convertible debentures if the issuing company permits them to. Not all companies allow NRIs to invest in NCD. NRIs can invest through their bank account in the eligible NCD issues.

NCDs are subjected to short-term as well as long-term capital gain tax. The interest earned from the NCD investment falls under the ‘Income from other sources category’.Further, if the NCDs are sold on the leading stock exchange, CG taxes are applicable which are as follows:

  • Non-convertible debentures sold within the 12 months of tenure from the date of investment/ allotment- short-term capital gain tax are applicable under normal tax bracket.
  • Non-convertible debentures sold after the 12 months of tenure from the date of investment/ allotment- LTCG tax are applicable at the rate of 10% without indexation/ 20% with indexation. Whichever is applicable or lower.

Following are the categories from which NCD applications are accepted:

  • Retail Individual Investors which includes Indian citizens residing in India and Hindu Undivided families (HUFs) applying for NCD for above ₹1,00,000.
  • High Net-worth Individuals which includes Indian citizens residing in India and Hindu Undivided families (HUFs) applying for NCD for above ₹1,00,000.
  • Institutional category which includes mutual funds, venture capital funds, pension funds, public financial institutions, Commercial, regional rural and co-operative banks, provident funds.
  • Non-institutional category which includes Limited liability partnership (LLP), Partnership firms, scientific and industrial research organizations (only a few of them), Public and Private charitable trusts.

There are certain steps involved in the allotment of NCD:

  • The NCD issue registrar collects the application from different investor categories.
  • All the eligible investors/ applications are then scrutinized based on the categories- Institutional, Non-institutional, High net-worth individual, and retail individual investors.
  • NCD allotments are done on a first come first serve basis for each investor category based on the reserved quota.

There are certain criteria to meet for the company to issue non-convertible debentures in India. Companies issue NCD to raise funds for their business. Any company is eligible to issue NCD if the following conditions are met:

  • It must have a net worth equivalent to or more than ₹4,00,00,000.
  • Must have sanctioned working capital limit/ term loan by the bank.
  • The company’s borrower account must be classified as the standard asset by the bank.
  • The company should have the credit rating to issue NCD from the rating agencies such as CRISIL, ICRA, FITECH ratings India Pvt. Ltd or CARE.

Cumulative option seems to be the best as it offers the highest yield and allows to reinvest the interest at the same coupon rate / interest rate (i.e., there is no reinvestment risk).

NCD is neither a share nor fixed deposit. It is similar to fixed deposit in the sense that at time of redemption, the return is fixed.

Dematerialized forms of NCDs are not taxable.

No, there are no special benefits for senior citizens by investing in NCD.

Applicants are not allowed to make changes. They can withdraw their Application at any time prior to the Issue Closing date.

Allotment is based on “First come first serve” basis.

Debentures can be bought and sold through secondary market. They are traded like shares.

No. In the case of public issue of debentures, there would be a large number of debenture holders on the register of the company. As such it shall not be feasible to create charge in favour of each of the debenture holder.

Section 71 and other applicable provisions of the Companies Act, 2013 regulates the provisions relating to debentures.

Amount invested by a single investor is as decided by the company and varies with the issuances. Usually investors can start investing with amounts as low as Rs 10000/-.

Forthcoming NCD

Bid Time: 10:00 am to 5:00 pm

Note: Cut-off time for online application is 5:00 pm on the closing day (subject to change).

Close NCD

Bid Time: 10:00 am to 5:00 pm

Note: Cut-off time for online application is 5:00 pm on the closing day (subject to change).

Transaction Report

Quick Access