Group 4

Economic Policy/Guidelines
SEBI Guidelines for Debentures in India

Context Name Nikhat Topic Introduction to Debentures Types of Debentures Merits & Demerits Difference between Debenture & Share SEBI Guidelines Conclusion Mitesh Monisha Payal Monisha .

Introduction to Debentures ‡ A debenture is defined as a certificate of agreement of loans which is given under the company's stamp and carries an undertaking that the debenture holder will get a fixed return (fixed on the basis of interest rates) and the principal amount whenever the debenture matures. .

‡ If listed on the stock exchanges. . ‡ When offered for subscription a debenture redemption reserve has to be maintained. ‡ They are fixed interest debt instruments with varying period of maturity. they should be rated prior to the listing by any of the credit rating agencies designated by SEBI.Characteristics ‡ Debenture Holder are the creditors of the company.

CONVERTIBILITY: y Fully Convertible & Non convertible C. TENURE : y Redeemable & Non-Redeemable D. SECURITY : Secured & unsecured B. RECORDS: y Registered & Bearer ‡ .Types of Debentures A.

Merits y No dilution of control y Long term finance y Tax Benefit y Investor¶s safety .

Demerits y Fixed obligation y Charge on assets y No voting Rights .

tenure.Differentiation Debentures Creditors of the company Shares Owners of the company Have no voting rights and no consequent Have voting rights and consequent control of the company control of the company Interest is paid at a predetermined fixed rate On basis of Security. Convertibility. Can be converted into shares On liquidation they are paid first Dividend on equity is paid at variable rate depending on profits Equity shares and preference shares Can not be converted into debentures On liquidation paid after paying debentures and creditors . Records.

in stages. the conversion period. if any. shall be pre-determined and stated in the prospectus. Issue of debenture with maturity of 18 months or less are exempt from the requirement of appointing Debenture Trustees or creating a Debenture Redemption Reserve (DRR). .SEBI guidelines for debentures ‡ Issue of FCDs having a conversion period more than 36 months ‡ ‡ ‡ ‡ will not be permissible. Premium amount on conversion. unless conversion is made optional with ³put´ and ³call´ option. The interest rate for above debentures will be freely determinable by the issuer. Compulsory credit rating will be required if conversion is made for FCDs after 18 months.

. yield on redemption for the PCDs/NCDs shall be indicated in the prospectus. but before 36 months. redemption amount. ‡ Premium amount at the time of conversion for the PCD.SEBI guidelines for debentures Contd. the names of the debenture trustees must be stated in the prospectus and DRR will be created in accordance with guidelines laid down by SEBI. ‡ In other cases. ‡ The trust deed shall be executed within six months of the closure of the issue. ‡ Any conversion in part or whole of the debenture will be optional at the hands of the debenture holder. period of maturity. if the conversion takes place at or after 18 months from the date of allotment.

.Conclusion y SEBI has laid down guidelines for debentures issued by the company in order to trade in the debt market. y This helps investors to study the true and fair view to invest in the debt market.

sebi.Webliography y .org y y www.