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Indian Corporates Offering NCDs

TIP Guy 24 August 2009 bonds, commentary, opinion 1 Comment

question1In very simple terms, Non Convertible Debentures (NCDs) are a loan to the company issuing it. This loan, or NCDs, cannot be converted into equity. Public or Private companies issue NCDs to fund many activities such as growth plans, corporate expenses, pay out earlier loans, working capital, etc. I consider NCDs as a form of  private or public sector bonds, depends upon who issues it.

The key attractive aspect about NCD is they are fixed income vehicle with capital being secured. In general, NCDs offer returns that are 2% to 4% higher than savings, CDs, or some of other government bonds. For example, the current L&T offers interest rates in the range of 9.51% to 10.24%, while Shiram Transports offered NCD upto 11.5%.

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