Issue_of_Debentures_Classroom_Content.pptx

The issue of debentures is a method companies use to raise long-term debt capital by borrowing money from the public. A debenture is a written instrument, or certificate, that acknowledges a debt and promises to repay the principal amount along with fixed interest at a specified rate and time.

1. Issue of Debentures An Overview of Debenture Issuance and its Key Aspects

2. Meaning of Debentures Debentures are debt instruments issued by companies to raise long-term capital. They represent a promise to repay the principal amount with interest at a future date. Debentures are issued to both individual and institutional investors.

3. Issuing Company The company issuing debentures is called the issuer. It may be a corporation, government entity, or other organization. Funds raised are often used for expansion, working capital, or debt refinancing.

4. Terms and Conditions Outlined in a 'debenture indenture' or 'debenture prospectus'. Includes interest rate, maturity date, redemption terms, and covenants. Sets legal framework and investor protections for the issue.

5. Interest Rate Debentures carry an interest rate known as the coupon rate. It can be fixed or floating depending on market conditions. Interest is paid regularly to debenture holders.

6. Maturity Date The date when the principal amount is repaid to debenture holders. It can range from a few years to several decades. Defined clearly in the debenture terms.

7. Security: Secured vs Unsecured Secured Debentures: Backed by specific assets of the company as collateral. Unsecured Debentures: Not backed by assets, also known as 'naked debentures'. Security type affects investor risk and return.

8. Convertible and Non-Convertible Debentures Convertible: Can be converted into equity shares after a specified period. Non-Convertible: Cannot be converted; repaid with interest at maturity. Convertible options provide potential for capital appreciation.

9. Issue Price Debentures can be issued at par, premium, or discount. Issue price depends on market demand and investor sentiment. Premium and discount affect the yield for investors.

10. Market Placement Debentures may be privately placed or publicly issued. Public issues require regulatory approval and stock exchange listing. Private placements target specific investors, often with customized terms.

11. Redemption Redeemable Debentures: Repaid at or before maturity date. Irredeemable Debentures: Have no fixed redemption date. Redemption terms are specified in the issue document.

12. Interest Payment Interest is paid periodically, typically semi-annually or annually. It is a fixed financial obligation of the issuing company. Ensures steady income to investors.

13. Conclusion Issuing debentures is an effective way for companies to raise long-term funds. It balances risk and return for both issuer and investor. Proper compliance and structuring are essential for successful issuance.