Dit School of Business Presentation ON Debentures: Presented By:-Saju Thomas Abhishek Singh Sunil Sharma
Dit School of Business Presentation ON Debentures: Presented By:-Saju Thomas Abhishek Singh Sunil Sharma
Dit School of Business Presentation ON Debentures: Presented By:-Saju Thomas Abhishek Singh Sunil Sharma
PRESENTATION
ON
DEBENTURES
PRESENTED BY:-
Saju Thomas
Abhishek Singh
Sunil Sharma
MEANING:-
• Debenture is a debt security issued by a
company (called the Issuer), which offers to
pay interest in lieu of the money borrowed for
a certain period. In essence it represents a loan
taken by the issuer who pays an agreed rate of
interest during the lifetime of the instrument
and repays the principal normally, unless
otherwise agreed, on maturity.
DEBENTURES FEATURES :-
• A debenture is a promissory note , issued by a
company
• It represent creditor ship securities and Debenture
holders are long term creditors of the company
• As a secured instrument it is a promise to pay interest
and repay principle at stipulated times.
• In contrast to equity capital which is a variable
income (dividend)security , the debentures /notes are
fixed income (interest)security.
VARIOUS TERMS IN DEBENTUERS
• TRUST INDENTURE
• INTEREST
• MATURITY
• DEBENTURE REDEMPTION RESERVE
• CALL & PUT PROVISION
• SECURITY
• CONVERTIBILITY
• CREDIT RATING
• CLAIM ON INCOME & ASSETS
Trust indenture:-
• When a debenture is sold to investing public ,a
trustee is appointed through an indenture /trust
deed.
• Trustee are usually a financial institution
/bank/insurance company / firm of attorneys.
• The trust deed provides the specific terms of
agreement such as description of debentures ,
rights of debenture-holders , rights of the
issuing company & responsibilities of the
trustee.
Interest:-
• The debentures carry a fixed (coupon) rate of
interest , the payment of which is legally
binding/enforceable .
• The debenture interest is tax deductable and is
payable annually /semi annually/quarterly
• MATURITY:-
• It indicates the length of the time for redemption of
the par value. A company can choose the maturity
period , though the redemption period for non
convertible debenture is typically 7-10 years .
Debenture redemption reserve(DRR)
• A DRR has to be created for the redemption of all
debentures with a maturity period exceeding 18 months
equivalent to at least 50 % of the amount of
issue/redemption before commencement of redemption.
• Call & put provision :-
• The call/buy-back provision provides an option to the
issuing company to redeem the debenture at a specified
price before maturity .
• The call price may be more than the par/face value by
usually 5 % , the difference being call premium . The put
option is a right to the debenture – holder to seek
redemption at a specified time at pre-determined prices.
Security:
Debentures are generally secured by a charge on the present and
future immovable assets of the company by way of an equitable
mortgage.
Convertibility:
Apart from pure non-convertible debentures (NVD), debentures can
also be converted into equity share at the option of the debenture-
holders. The conversion ration equity share at the option of the
debenture-holders. The conversion ration and the period during which
conversion can be affected are specified at the time of the issue of the
debenture itself.
Credit Rating:
To ensure timely payment of interest and redemption of
principal by a borrower all debentures must be
compulsorily rated by one or more of the four credit rating
agencies, namely, Crisil, Icra, Care .
.
THANK YOU