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DEBENTURES

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Features of Convertible Debentures: 

(i) They are issued for cash at par;

(ii) They are of convertible nature. So, they can be converted into equity shares;

(iii) They may be fully or partly convertible;

(iv) The conversion may take place in one or more stages;

(v) In case, a part of debenture is convertible after 18 months, the credit rating should be obtained by the company.

(vi) The convertible debentures issued by a public company are listed on the stock exchange to assure liquidity. 

Advantages of Convertible Debentures: 

Advantages to the Company:

(i) Capitalization of interest cost is possible;

(ii) They carry lower rate of interest in comparison with Banks and Financial institutions;

(iii) The convertible part of debentures is treated as equity by financial institutional;

(iv) The equity capital gets increased after each conversion;

(v) Tax benefits are higher;

(vi) It is a popular form of financing as interest rates are lower;

(vii) There is a greater degree of autonomy for the companies available with these kinds of debentures. 

Advantages to the Investors:

(i) A fixed return by the way of interest is ensured;

(ii) The investor tends to get value appreciation on his investment;

(iii) Due to presence of charge on investors, there is prompt payment of principal & interest;

(iv) It is highly liquid form of investment.

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