Debentures

Debentures are long-term debt instruments issued by corporations or government entities to raise capital. They represent a form of borrowing where the issuer promises to repay the principal amount to the debenture holders at a specified maturity date, along with periodic interest payments.

Here are some key points about debentures:

1. Issuance: Debentures are typically issued by companies or governments to finance projects, expansion plans, or other capital-intensive activities. They can be issued publicly, making them available to a wide range of investors, or privately to a select group of investors.

2. Types: Debentures can be classified into various types based on their features. Some common types include convertible debentures, non-convertible debentures, secured debentures, unsecured debentures, redeemable debentures, and perpetual debentures.

   • Convertible debentures: These debentures can be converted into equity shares of the issuing company after a specified period.
   • Non-convertible debentures: These debentures cannot be converted into equity shares.
   • Secured debentures: These debentures are backed by specific assets of the issuing company.
   • Unsecured debentures: These debentures are not backed by any specific assets and rely on the general creditworthiness of the issuing company.
   • Redeemable debentures: These debentures are issued with a predetermined maturity date, at which the issuer is obligated to repay the principal amount to the debenture holders.
   • Perpetual debentures: These debentures do not have a fixed maturity date and are repayable only at the discretion of the issuer.

3. Interest Payments: Debenture holders receive periodic interest payments, which are typically fixed and predetermined. The interest rate is stated in the debenture agreement and is usually expressed as a percentage of the principal amount.