Debentures Ppt
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Transcript of Debentures Ppt
SEBI Guidelines for Debentures in India
Economic Policy/Guidelines
Group 4
ContextName Topic
Nikhat Introduction to DebenturesTypes of Debentures
Mitesh Merits & Demerits
Monisha Difference between Debenture & Share
Payal SEBI Guidelines
Monisha Conclusion
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.
Characteristics
• Debenture Holder are the creditors of the company.• They are fixed interest debt instruments with varying period of
maturity. • When offered for subscription a debenture redemption reserve
has to be maintained.• If listed on the stock exchanges, they should be rated prior to the
listing by any of the credit rating agencies designated by SEBI.
Types of Debentures
A. SECURITY :• Secured & unsecured
B. CONVERTIBILITY: Fully Convertible & Non convertible
C. TENURE : Redeemable & Non-Redeemable
D. RECORDS: Registered & Bearer
Merits
No dilution of controlLong term finance Tax BenefitInvestor’s safety
DemeritsFixed obligation Charge on assetsNo voting Rights
DifferentiationDebentures Shares
Creditors of the company Owners of the company
Have no voting rights and no consequent control of the company
Have voting rights and consequent control of the company
Interest is paid at a predetermined fixed rate
Dividend on equity is paid at variable rate depending on profits
On basis of Security, tenure, Convertibility, Records.
Equity shares and preference shares
Can be converted into shares Can not be converted into debentures
On liquidation they are paid first On liquidation paid after paying debentures and creditors
SEBI guidelines for debentures • Issue of FCDs having a conversion period more than 36 months
will not be permissible, unless conversion is made optional with “put” and “call” option.
• Compulsory credit rating will be required if conversion is made for FCDs after 18 months.
• Premium amount on conversion, the conversion period, in stages, if any, shall be pre-determined and stated in the prospectus.
• The interest rate for above debentures will be freely determinable by the issuer.
• 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 Contd.
• In other cases, 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.
• 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, if the conversion takes place at or after 18 months from the date of allotment, but before 36 months.
• Premium amount at the time of conversion for the PCD, redemption amount, period of maturity, yield on redemption for the PCDs/NCDs shall be indicated in the prospectus.
Conclusion
SEBI has laid down guidelines for debentures issued by the company in order to trade in the debt market.
This helps investors to study the true and fair view to invest in the debt market.
Webliographywww.sebi.org www.wikipedia.orgwww.investopedia.com