thinking about debentures then from what is debentures in simple language to how to invest in debentures we can . let's leave for a minute what dibenture and let's assume that there is a company named 'A' and it wan't to raise fund then there are two major way's
1) first is to dilute it's equity and give it's share and there is no give any interest or money to it's investors.
2)second major way is to take loan from the bank or investors but there are two major problems .first is paying interest on the loan taken and second is that even corporates have to give some collateral or securities on account of of taking loan.
but wait there is also a third step which is debentures through which goverment and companies can raise money directly from lenders without any collateral or securities in belief or security of the goverment trust and company or corporates size and trust
Time period of investment
the time period of investment can vary depending on the type of debentures but most common are in the range of 5-15 years.
minimum amount of investment
the minimum amount of investment in debentures vary depending on the type of debentures but in india minimum investment is in the range of almost 10,000 indian rupees
how to invest in debentures
Debentures are of two types, namely convertible debentures and non-convertible debentures (NCD). Non-convertible debentures (NCD) are those which cannot be converted into shares or equities.
other interesting facts about debentures
in case of any company going bankrupt the money that will be retrived from the the company will be first paid to the secured bond holders and then the left money will be used to pay to the debentures holders secured and not secured
rating of debentures
although in case of goverment backed or taken debentures the importance of rating if it exist it is not that important because in case of goverment taken debentures the rating does not matter so much because in case the most government taken bond's the goverment pay's it mostly without any hassle both with principal amount along with the interest of the debentures
but in case of commercial and commercial owned debentures the rating of the debentures is very important that how much the rating is such as A and even we have to take in consideration the reliability of the credit issuing agency that how much reliable the credit issuing agency is such as Moody's ,CRISIL
the security or trust of the debentures is trustified by the rating of the bond which is being done by many rating agencies such as in the In the United States, the three primary bond rating agencies are Standard & Poor's Global Ratings, Moody's, and Fitch Ratings.
in india rating agencies are the CRISIL Limited,India Ratings and Research Pvt Ltd ICRA Limited,CARE ,Brickwork Ratings India Pvt Ltd and many moreFollow @businessandinv4
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