What is NCD?

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What is ncd
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Introduction

• Non-convertible debentures(NCDs) are a financial
  instrument that is used by companies to raise
  long-term capital. This is done through a public
  issue.
• NCDs are a debt instrument with a fixed tenure
  and people who invest in these receive regular
  interest at a certain rate.
• Some debentures can be converted into shares
  after a certain point in time. This is done at
  the discretion of the owner. However, this is not
  possible in the case of NCDs. Thats why they are
  known as non-convertible.
• Even though NCDs cannot be converted into shares,
  they offer other benefits.

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Types of ncd
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Things to consider before investing in ncd

• Check companys background
• Make sure you research the companys 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 companys 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.

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