Outlook Money
NCDs or the Non-Convertible Debentures are a debt instrument that cannot be converted into equity or stock and has a fixed tenure.
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.
NCDs carry tax implications depending on the tax bracket the investor falls under. For example, if NCDs are sold within a year, STCG will be applicable as per the income tax.
NCDs are generally listed securities hence one can sell them in the secondary market before maturity. One could look at different interest payout options offered by NCDs such as monthly, quarterly, half‐yearly, or annually.
The credit risk in NCDs refers to default risk associated with the non-payment of interest or the principal amount as promised. This risk is higher for NCDs issued by companies with lower credit ratings.
The market value of NCDs is adversely affected if the interest rates hike.
Before investing in NCDs, one should consider and understand the risk parameters about ratings, tenure, profitability balance sheet, etc.
Compiled by Syed Muskan
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