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ncd
NCD(Non-Convertible Debentures )
NCD stands for Non-Convertible Debentures. In India, Non-Convertible Debentures are debt instruments issued by corporations, public sector undertakings (PSUs), or other entities to raise funds from investors. NCDs are fixed-income securities that offer a fixed interest rate and have a specified maturity period.
Here are some key features of NCDs in India:
1. Debt Instrument
NCDs are a type of debt instrument where the issuer borrows money from investors and agrees to repay the principal amount along with regular interest payments over a specified period.
2. Non-Convertible
Unlike convertible debentures, NCDs cannot be converted into equity shares of the issuing company. They remain as debt instruments until maturity.
3. Interest Payments
NCDs pay a fixed interest rate, also known as a coupon rate, to investors. The interest may be paid monthly, quarterly, annually, or at other intervals as mentioned in the terms of the NCD.
4. Credit Ratings
NCDs are assigned credit ratings by credit rating agencies to indicate the issuer's creditworthiness and the risk associated with the investment. Higher-rated NCDs are considered to have lower default risk but may offer a relatively lower interest rate.
5. Maturity Period
NCDs have a specified maturity period, which can range from a few months to several years. At the end of the maturity period, the issuer repays the principal amount to the investor.
6. Listing
NCDs can be listed on stock exchanges, providing investors with the option to buy or sell them in the secondary market before maturity. However, NCDs are not as liquid as stocks, and trading volumes may be lower.
7. Taxation
The interest income earned from NCDs is subject to taxation based on the individual's income tax slab. Additionally, if NCDs are sold before maturity, any capital gains or losses may also be subject to taxation.
Investing in NCDs can provide investors with a fixed income stream and the opportunity to diversify their investment portfolio. However, it's important to consider the creditworthiness of the issuer, the prevailing interest rates, and the investor's risk tolerance before investing in NCDs. Investors should carefully read the offer documents, understand the terms and conditions, and assess the credit ratings assigned to the NCDs before making an investment decision.
It's advisable to consult with a financial advisor or conduct thorough research to evaluate the suitability of NCDs within the context of an individual's overall financial goals and risk profile.