NCDs / BONDs

Non-convertible debentures

Non-convertible debentures


Non-convertible debentures (NCDs) are debentures which cannot be converted into equities or shares. As the convertibility feature is not attached to these debentures, they usually carry higher interest rates than their convertible counterparts.

For those who are looking for the investment instrument that offers high returns with moderate risk and giving the flexibility of choosing between short and long tenures, NCDs might be the right choice.

An NCD can be secured or unsecured. Secured NCDs are backed by the issuer company's assets to fulfil the debt obligation unlike unsecured NCDs. The NCD issues are rated by credit rating agencies like CRISIL, ICRA, FITCH, and CARE to ensure the company's ability to service the debt on time & lower default risk.

Benefits:

  • As NCD’s are listed on stock exchanges, they provide liquidity to holder
  • The tenure of NCDs can be anywhere between 2 years and 20 years
  • NCDs are rated by rating agencies such as CRISIL, ICRA and FITCH
  • If you buy a NCD that pays interest then the interest will not attract TDS
  • The debentures are generally offered in four options: monthly, quarterly, annual and cumulative interest
 

BONDs


Fixed income products such as bank/company deposits and bonds are popular with risk averse investors as they provide safety of capital with returns in the form of fixed periodic payments and the eventual return of principal at maturity.

Most investors, regardless of age should have at least a small amount of their portfolio allocated to fixed income products like bonds. This adds safety and consistency to a portfolio.

Karvy's online trading portal is a complete online investment destination that offers multi-asset investment choices. Our advisory service adopts a holistic approach to portfolio building and is qualified to advice on all major asset classes for investments. Our web portal allows you to purchase NCDs/corporate bonds online. You can trade in any bond out of the scores of corporate bonds that are traded daily on the stock exchange.

Features of Fixed income Products:

Diversification:

Investment in fixed income securities counterbalances high-risk investments in a portfolio and serves to even out returns in times of volatility.

Fixed returns:

They offer a potentially attractive and regular income avenue as the rate of interest is fixed (in most cases but not all) till maturity.

YTM (Yield to Maturity):

By investing in bonds and holding them till redemption, you can earn maximum returns in the form of regular interest plus the face value amount on maturity.

Protect from volatility:

While fixed income securities generally do not offer the high returns potential of other investments, you are spared from the volatility common in other markets as its price fluctuation is relatively lesser than equity stocks.

Liquidity:

Fixed income securities provide the flexibility and liquidity required to construct a portfolio customized to your specific investment objective. If required, low-risk fixed income instruments like government bonds can be sold at short notice.

Lower Risk:

Fixed income securities represent a loan from investors. As these investors are creditors to the company, in the eventuality of the company being winded down, they have priority over shareholders.