November 11, 2025
4 mins read
Non Convertible Debentures, or NCDs, are used by companies to raise funds while still keeping possession of the company. In other words, they borrow money from the public with a promise to pay interest on the amount, on a regular basis, until maturity, when the full price is paid back.
These funds will never convert to shares. So, investors in Non Convertible Debentures will always be creditors and not part-owners of the company, unlike convertible debentures. The company typically decides how often interest is paid, which is typically monthly, quarterly, or annually.
Most Non Convertible Debentures can be sold before maturity because they're traded on stock exchanges. The company uses the money to grow the company, pay debt, or meet other short-term cash needs. SEBI supervises the process to keep it above board.
Because of the way they are constructed, Non Convertible Debentures are categorised as fixed-income investing. Non Convertible Debentures can be issued by public companies as well as private companies. The two can vary in maturity and rate. This makes the marketplace pretty sizable and gives investors a lot of options in terms of credit rating and terms.
A Non Convertible Debenture is basically a loan that investors give to a business. The "non-convertible" term is important since it means that these debentures will never become equity shares, no matter how long they are held.
They have a fixed coupon rate that doesn't vary. When the investment matures, investors earn back their principle and any interest that is still owed. Usually, credit rating agencies check the issuer's financial strength.
Non Convertible Debentures are always debt, hence they never change into equity. Interest payments can be made in installments or all at once at the conclusion, depending on the terms of the issue.
Fixed Tenure: Non Convertible Debentures are given out for a specific amount of time, which can be anywhere from a few months to several years. At the time of issue, the length is evident.
Coupon Rate: Non Convertible Debentures provide a fixed interest rate throughout the life of the loan. Thanks to the fixed nature, income-seeking investors like the certainty of this income stream.
Credit Rating: Credit rating agencies like CRISIL, and ICRA, write credit ratings for Non Convertible Debentures. This rating allows investors to assess the creditworthiness, or the chance the issuer has of paying back the loan.
Listed: Most Non Convertible Debentures are listed on a stock exchange, enabling investors to buy and sell them in a secondary market.
Redemption: At the time of maturity, the principal amount will be returned to the investor as per the contract.
Secured or Unsecured: Some issues are secured against assets while the issuers of other issues rely entirely on their moral integrity.
Taxable Returns: The interest income is taxable according to the individual investor's income levels.
Liquidity: You can sell listed Non Convertible Debentures before they reach maturity, but only if there is demand in the market.
Secured Non Convertible Debentures are backed by certain assets of the company. Investors can take those assets if the borrower doesn't pay back. This security makes things less risky.
Unsecured Non Convertible Debentures There is no collateral for them. The issuer's financial soundness is the only thing that matters for repayment. There is more danger for investors here.
Short-Term Non Convertible Debentures usually have terms of less than three years. They are good for people who want to take on debt quickly.
Long-Term Non Convertible Debentures last longer than three years. Good for those who are okay with locking up their money for a lengthy time.
Listed Non Convertible Debentures are traded on well-known stock markets. If you wish to get out before maturity, they give you liquidity.
Unlisted Non Convertible Debentures are not sold on exchanges. Usually sold privately, which makes them less liquid, however they can be made to fit certain investors.
There are two common ways to get there. The first time is during the public issue period. Investors apply through their Demat account, which they can do through a broker or an online investing platform. When you get Non Convertible Debentures, they go straight into your Demat account.
The second way is through the secondary market, but only if the Non Convertible Debenture is listed on exchanges. It's important to read the offer paperwork before you invest. To decide if something is right for you, look at things like the coupon rate, the length of the loan, the issuer's profile, and the credit rating.
Credit Rating: Ratings show how stable the issuer's finances are and how likely they are to pay back the loan. A strong rating means a lesser danger of default.
Coupon Rate: The coupon rate tells you how much interest you'll get. A higher rate may look good, but it could mean that the issuer is more likely to fail.
Tenure: Make sure your investment time frame matches your ambitions. Longer tenures lock up money, while shorter ones make it easier to get cash.
Type of NCD: Find out if the problem is secured or unsecured, and if it is listed or not. There are varied levels of danger for each choice.
Tax Implications: Your interest income is taxed based on your income level. This has an effect on the net returns from Non Convertible Debentures.
Liquidity: You can buy and sell listed Non Convertible Debentures on exchanges. But the real liquidity depends on trading volumes, which might change.
Issuer's Track Record: Looking at the issuer's prior repayment history, defaults, and financial stability will help you figure out how reliable they are.
Companies can borrow money directly from investors without giving up stock by using non-convertible debentures. They have defined returns and set deadlines, which makes them suitable to people looking for structured debt instruments.
From the point of view of the investor, Non Convertible Debentures include credit risk and tax issues. Before getting involved, it's important to carefully go at the tenure, ratings, and track record of the issuer.
In reality, Non Convertible Debentures are somewhere in the middle: they are not as liquid as stocks but not as rigid as traditional bonds. Investors can better understand how debt markets move money to businesses by knowing these things.
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The value of investing in non convertible debentures depends on several factors, including the credit rating of the issuer, the offered coupon rate, and the investor’s risk preference. As fixed-income instruments, they serve a defined financial purpose without equity conversion.
NCD meaning refers to debt instruments that are not convertible into equity shares and carry a fixed interest rate and tenure. They are used by companies to raise funds for specific purposes.
NCDs and FDs differ in terms of issuer type, risk profile, liquidity, and return structure. NCDs are market-linked and involve credit risk, whereas FDs are typically offered by banks and come under deposit insurance.
If the NCD is listed on a recognised stock exchange, it may be sold in the secondary market before maturity. Liquidity depends on trading volume and market demand. Unlisted NCDs cannot be sold unless privately arranged.
Non convertible debentures are issued by corporations to raise funds and are repayable after a fixed term. For instance, a company may issue NCDs offering 8% annual interest for a tenure of 5 years without equity conversion rights.
Non convertible debentures offer a structured form of fixed-income investment, regular interest payouts, and defined tenure. They provide an instrument for capital allocation based on the issuer’s offer terms and the investor’s preferences.
No, the interest earned on NCDs is not tax-free. It is added to the investor’s total income and taxed according to the applicable income tax slab rate.
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