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3K views12 pagesOverview of Debentures and Their Types
This presentation provides an overview of debentures. It defines debentures as an acknowledgment of debt or loan raised by a company that is divided into parts. Debenture holders receive interest payments but do not control company management. In the event of liquidation, debenture amounts must be repaid before shareholders receive any funds. The presentation describes different types of debentures and guidelines for issuing them. It outlines advantages for companies in accessing long-term funds and for investors receiving fixed income, as well as disadvantages regarding repayment obligations and lack of control/voting rights.
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100% found this document useful (1 vote)
3K views12 pagesOverview of Debentures and Their Types
This presentation provides an overview of debentures. It defines debentures as an acknowledgment of debt or loan raised by a company that is divided into parts. Debenture holders receive interest payments but do not control company management. In the event of liquidation, debenture amounts must be repaid before shareholders receive any funds. The presentation describes different types of debentures and guidelines for issuing them. It outlines advantages for companies in accessing long-term funds and for investors receiving fixed income, as well as disadvantages regarding repayment obligations and lack of control/voting rights.
Uploaded by
Sunil PillaiCopyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
Presentation on
Debenture
Presented BY:
SARVESH PANDEY
Pallab
Pradeep
Pratistha
Introduction
A Debenture may be defined as an
acknowledgment of a debt or loan raised by a
company.
A Debenture is the basic debt instrument which
may be issued by a borrowing company.
A loan raised by a company may be divided in
large number of part, each part being called a
Debenture.
Characteristics of Debentures
Debenture is a creditors ship Security.
Company has to pay interest to Debenture
holders at the agreed rate.
Debenture holder do not have any control over
the management of the company.
In case of winding-up of a company, the amount
of debenture will be repaid before any amount is
paid to shareholder.
Types of Debenture
In the Redemption point of view
1. Redeemable Debenture
2. Irredeemable Debenture
In the Security point of view
1. Mortgage Debenture
2. Simple Debenture
In the Record point of view
1. Registered Debenture
2. Bearer Debenture
In the Convertible point of view
1. Convertible Debenture
2. Non-Convertible Debenture
In the Priority point of view
1. First Debenture
2. Second Debenture
Guidelines of SEBI for issuing
Debenture
Where FCDs/PCDs are issued by A New
Company having 5 Year track record of
consistent Profit.
Not more then 20% of the total capital raised by
the Non-Government public Limited Company.
Issue of Debenture with maturity of 18 month or
less are exempt from the requirement of
appointment of Debenture Trustee or creating a
Debenture Redemption Reserve (DRR).
Advantages of Debentures
Advantages to the Company
1. Debenture is one of the best source of Long-
Term Fund to a Company.
2. The interest on Debenture is Tax-Deductible
expense.
3. A Company can trade on equity by mixing of
Debentures in its Capital Structure and thereby
increase its earning per share.
Advantages to Investors
1. Debenture provide a Fixed , regular and stable
source of Income.
2. An Investor can Sell or Mortgage his instrument to
obtain Loan from Financial Institution.
3. Many investor prefer Debenture because of a
Definite Maturity Period.
Disadvantages of Debenture
Disadvantages to the Company
1. The Fixed Interest charge and Repayment of
Principal amount on maturity are legal
obligation of the Company.
2. The use of Debt financing usually increase Risk
in the Firm.
3. Cost of Raising Financing through Debenture is
also high because of High Stamp Duty.
Disadvantages to Investors
1. Debenture Don’t carry any voting right and its
holder do not have any Controlling Power over The
management.
2. Interest on Debenture is Fully Taxable.
3. They do not have any claim on the Surplus Assets
and profit of the Company.
4. The price of Debenture in the market fluctuate
with the change in the interest rate.
CONCLUSION
The Firm, while designing the capital
Structure or Planning for raising additional
fund must evaluate all aspect before deciding
for Issue the Debenture. The price of share
and Debenture in the market move quite
often in opposite direction. The market price
reflect what the firm will get on new issue of
the security.
Thank you
