What are CCDs and Ocds?
Debentures are debt instruments. Broadly, the popular debenture instruments used by FPIs are of three kinds: Non-convertible debentures (NCD), Compulsorily Convertible Debentures (CCDs), and Optionally Convertible Debentures (OCD). NCDs are pure debt instruments.
What is compulsorily convertible debentures?
A compulsory convertible debenture is a bond that must be converted into stock at its maturity date. For companies, it allows for repayment of debt without spending cash. For investors, it offers a return in interest and, later, ownership of shares in the company.
What is the difference between preference shares and debentures?
Preference shares—also referred to as preferred shares—are an equity instrument known for giving owners preferential rights in the event of a dividend payment or liquidation by the underlying company. A debenture is a debt security issued by a corporation or government entity that is not secured by an asset.
Why are compulsorily convertible shares preference?
Convertible preferred shares can be converted into common stock at a fixed conversion ratio. Once the market price of the company’s common stock rises above the conversion price, it may be worthwhile for the preferred shareholders to convert and realize an immediate profit.
Can CCDs be converted to NCDs?
Debt Investment in India can be made by way of various instruments, such as: i. Non-Convertible Debentures (“NCDs”) are debt instruments which cannot be converted into equity shares of a company.
Can NCD be converted into equity?
Non-convertible debentures fall under the debt category. They cannot be converted into equity or stocks. NCDs have a fixed maturity date and the interest can be paid along with the principal amount either monthly, quarterly, or annually depending on the fixed tenure specified.
What is convertible debentures answer in one sentence?
A convertible debenture is a type of long-term debt issued by a company that can be converted into shares of equity stock after a specified period. Convertible debentures are usually unsecured bonds or loans, often with no underlying collateral backing up the debt.
Who can issue convertible debentures?
Typically, a convertible debenture is issued by a company and can be converted into equity shares eventually. Notably, the decision to convert debentures into equity shares lay with shareholders, and they are treated as the creditor or lender. Regardless, in some cases, issuers may possess the conversion rights.
Can convertible preference shares be listed?
As per Securities and Exchange Board Of India (Issue And Listing Of Non-Convertible Redeemable Preference Shares) Regulations, 2013 Non-Convertible Redeemable Preference Share means a preference share which is redeemable in accordance with the provisions of the Companies Act, 1956 and does not include a preference …
What’s the difference between compulsorily convertible and non convertible debentures?
Compulsorily convertible debenture also known as CCD is a type of debenture in which the whole value of the debenture must be converted into equity by a specified time.
What is a compulsorily convertible preference share ( CCP )?
What is Compulsorily Convertible Preference Shares (CCPS)? Compulsorily Convertible Debentures (CCDs) or Compulsorily Convertible Preference Shares (CCPS) are instruments that compulsorily convert into equity shares of the issuing company on the mutually pre-decided conditions at the time of issuance of the instruments.
How are convertible debentures converted into equity shares?
A convertible debenture is defined as one of the types of loan which is issued by a company that can be converted into a stock. In Compulsorily convertible debenture the cost of the debenture is converted into an equity share within a fixed period of time. It is also known as CCD. CCD is not a combination of pure debt or pure equity.
Can a NBFC issue compulsory convertible preference shares?
CCPS is also known as Compulsory Convertible Preference Shares which is a well-recognized investment instrument preferred by Private Equity investor. CCPS is referring to as an anti-dilution or hybrid instrument. NBFC can issue CCPS without availing permission from Reserve Bank if the conversion remains well below the twenty-six percent.
