What Is NCD

Podcast Duration: 07:21
All you need to know about non-convertible debentures

Namaskar dosto. Angel Broking ke iss podcast mein aapka swagat hai

Non-convertible debentures rehta hai ek long term, comparatively low risk form of stock market investment. Jab stock market se related baatchith mein kisi ne NCD bol diya toh samjo ke woh non convertible debentures ke baare mein baat kar rahe hai. Non-convertible debentures ke baare mein jaanna zaroori hai, especially agar aapka target hai recurring returns chahiye for a long period, tumhara zyaada involve hone ke bina.

Iss podcast mein, main non-convertible debentures se related 5 important points cover kar lunga… yeh hai What are debentures?

Difference between non-convertible and convertible debentures.
Different types of NCDs
Factors to keep in mind
Commonly-used practices

Chaliye introduce kar leta hu debentures.

Company capital raise karne ke liye debentures offer karte hai. Jaise ki IPO (that is initial public offering) karne se koi bhi company apne growth ya expansion ke liye public se paise le ke, public ko shareholders bana dete hai, ussi tarah debentures are used by a company to raise capital for any positive initiative.

Aap soch rahe honge ki ek hi cheez hai toh kyu do do naam de ke confuse kar rahe ho?

Kyunki shares aur debentures mein ek bada farak hai aur woh hai lock-in period. Shares khareedh ke turanth bech sakte ho agar chahe toh ….and of course agar aapko profits mil raha hai. Kabhi bhi bech sakte ho - whenever it suits you, basically. However in the case of debentures, aapka investment kam se kam 10 saal ke liye lock in ho jayega yaani ke paisa nahi nikaal payega. Company debenture-holders ko usually periodic interest de deta hai. Shareholders ke pehle debenture-holders ko interest diya jata hai - debentures pe jo interest diya jata hai, usse actually coupons bol dete hai.

Sirf companies nahi, sarkar bhi debentures issue kar lete hai.

Agar aap debenture khareedhne jayenge toh make sure ki aapko "indenture" mil jayega kyunki yahi hai document jis me aapka purchase ka poora details rahega.

Ab dekh lete hai the difference between convertible and non-convertible debentures.

Convertible debentures after a specified period stock mein convert ho jata hai. Non-convertible debentures stock mein convert nahi ho jata hai. Maturity hone tak debentures debentures hi rahega aur liquidate karna ka option nahi hai.

Non-convertible debentures mein interest rate zyaada rehta hai.

Non-convertible debentures stock market pe becha ja sakta hai. Investor apna debenture company ko bhi vapas bech sakta hai.

Now that you have understood the concept of non-convertible debentures, mai aapko types of non-convertible debentures samjha deta hu.

Non-convertible debentures do kisam ke hote hai. Yeh hai secured aur unsecured.

Secured non-convertible debentures are backed by collateral - yaani ke secured non-convertible debentures mein company ka jo assets hai, uske against debentures becha jata hai. Agar company ne investor ka paisa nahi lauta diya toh investor assets ko liquidate kar ke (yaani ke assets ko bech ke) apna paisa vapas mil sakta hai.

Unsecured non-convertible debentures on the other hand are not backed by any collateral. Agar company ne investor ka paisa vapas nahi diya investor ke paas options kam hai lekin mostly log unsecured non-convertible debentures sirf bade, purane, reputed aur trustworthy companies se le lete hai.

Vese unsecured non-convertible debentures issue karne ke liye company ke liye asaan nahi hai. Agar kisi company ko non-convertible debentures karna hai toh in ko apna credit worthiness prove karna hota hai to credit rating agencies such as CRISIL and CARE.

Main sure hu ki ab aapko debentures mein kaafi interest ho gaya hoga. Sounds like a good deal hain nah? Long term hai mathlab har minute monitor karne ka zaroorath nahi hai. Aur interest bhi mil jayega. Stock market pe bech bhi sakte ho agar paise ki zaroorath hota… yeh sab sahi hai lekin koi bhi debentures lene ke pehle kahi cheezein check karna hota hai.

Yeh raha ek important list of three factors to consider before investing in debentures.

Credit score - Debenture ko AAA rating rehna chahiye. Yeh hota hai the safest possible rating - lekin phir be always careful rehna chahiye aur yaad rakna chahiye ki stock market mein koi guarantees nahi hai.

Interest rates - Aaj kal aap expect kar sakte ho about 9% to 12% interest on debentures. Interest rate kabhi fixed hota hai kabhi flexible. Aap soch rahe honge ki agar interest rate fixed deposit ke hi barabar hai toh koi debentures kyu lenge? Kyunki jaise maine bathayga tha - debentures stock market pe becha ja sakta hai. Toh locking jo hai sirf naam se hi hai. Investor ka paisa phir bhi liquid hai.

YTM - Yield to Maturity rehta hai the amount jo aapko mil jayega agar aap debenture ko maturity tak nahi bechoge.

Taxation - Non-convertible debentures bechne pe taxes lagtha hai jo aapke income tax se related hai. To agar aapka income high hai toh aapko apne NCD pe zyaada tax barna padtha hai. Obviously high income walon ko nah yeh fair lagtha hai aur nah attractive toh apne income aur tax slab ke hisaab se soch samaj ke decide kar lo what is the actual amount of profit jo aapko NCD se mil jayega?

In addition agar investor ne NCD ko ek saal mein bech diya toh 3% Short Term Capital Gains ka tax barna padtha hai aur agar ek saal ke baad bech diya toh 20% (!!!!) Long Term Capital Gains tax pay karna padtha hai.

Examples of commonly-used practices for managing debentures Log debentures ko interest declare hone ke baad bechte hai kyunki better price milte hai Investors NCD jo stock market pe khareeda jata hai kyunki dekhna gaya hai ki un ka performance behtar tha Investors sirf ek sector ka NCD nahi khareedhte hai - alag alag sectors mein lene se risk kam ho jata hai.

Debentures kahi logon ke liye profitable raha - aapko apne liye sahi investment hamesha karna chahiye aur hamesha company information, activities, reason for issuing debenture aur growth projections sab dekh ke hi koi bhi stock market investment karna chahiye.