What are NCDs & Bonds?
NCDs (Non-convertible debentures) are debt instruments used by large corporations and governments to raise long-term funds at a fixed interest rate. NCDs cannot be converted into stocks or shares. Simply put, it is a loan certificate or a loan bond that guarantees the payment of the specified amount plus interest.
Bonds are long-term investments generally issued by government & financial organizations to raise funds at a lower interest rate. These are secured investments, as one can sell the assets and get back their funds when failing to repay. In addition, bonds can be converted to stocks (in the case of Convertible Bonds).
Types of Non-Convertible Debentures
Secured and Non-secured are the two types of NCDS.
Secured NCDs: These NCDs are backed by issuer company’s assets
Non-Secured NCDs: Non-Secured NCDs are not backed by assets and are based on the creditworthiness of the issuer.
Features of Non-Convertible Debentures
- Issuance
- Tradable Securities
- Credit Rating
- Interest
- Return Rates
Why do NCDs Work for You?
- Guaranteed Return
- Higher Rate of Return
- Safety (NCDS with Higher Ratings)
- Allows Liquidity
- Exemption from TDS
Types of Bonds
- Government Bonds
- Corporate Bonds
- Municipal Bonds
- Convertible Bonds
- Zero Coupon Bonds
Features of Bonds
- Opportunity to sell
- Used as collateral
- Guaranteed by law
- More Predictable Returns
Factors to Consider Before Investing!
- Credit rating of the issuer
- Debt Level
- Capital Adequacy Ratio
- Provisions for Non-performing Assets
- Interest Coverage Ratio
