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  eetening debentures to make them
attractive.
 elling ordinary shares in future at a higher
price.
 Avoiding immediate dilution of earnings.
 Using lo cost capital initially.

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 A convertible debentures market value depends
on both investment and conversion value.
Market value is higher than both the investment
and conversion value. The difference is the
conversion premium. The premium results
because the convertible debenture offers fixed
income at a lo risk of price decline hile
assuming the chances of capital gains hen the
share prices increases.

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½           
        
        
        ½   
 

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 ^xercise Price
 ^xercise Ratio
 ^xpiration Date
 Detachability
 Right

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 Theoretical Value
        !   " 
 ˜f the share price is less than the exercise price
the arrants theoretical value is zero.
 The difference bet een the arrants¶ market
value and its theoretical value is called the
premium.
 Black±choles Model (after required adjustment)
can be used to value arrants.

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  eetening Debt
 Deferred ^quity Financing
 Cash ˜nflo in Future
 Other Advantages
1. Warrants keep the share prices high.
2. ˜nvestor enabled to have access to shares
ithout investing no .
3. ^nables promoters to increase their holdings.

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î    î 
 î˜D or zero coupon bonds or deep discount
bonds do not carry an explicit rate of interest.
The difference bet een the face value of the
bonds and its purchase price is the return to
the investors.
 Mahindra & Mahindra as the first company
in ˜ndia to issue convertible zero interest
bonds in January 1990.
 The purely zero-interest debenture as
issued by Best and Crompton ^ngineering
Company in December 1990.
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 ecured premium note is a secured
debenture redeemable at a premium. ˜t is a
medium to long term debenture. T˜CO
issued PNs ith arrants attached in ˜ndia
for the first time to raise Rs 346.5 Cr.

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