Bonds & Debentures

Debt instruments can be further classified into the following categories based on the different characteristics with which they are floated in the market:

  • Debentures
  • Bonds

Debentures- Main characteristics

  • They are fixed interest debt instruments with varying period of maturity.
  • Can either be placed privately or offered for subscription.
  • May or may not be listed on the stock exchange.
  • If listed on the stock exchanges, they should be rated prior to the listing by any of the credit rating agencies designated by SEBI.
  • When offered for subscription a debenture redemption reserve has to be maintained.
  • The period of maturity normally varies from 3 to 10 years and may also be more for projects with a high gestation period.

Bonds and Debentures

Debt instruments can be further classified into the following categories based on the different characteristics with which they are floated in the market:

  • Debentures
  • Bonds

Debentures- Main characteristics

  • They are fixed interest debt instruments with varying period of maturity.
  • Can either be placed privately or offered for subscription.
  • May or may not be listed on the stock exchange.
  • If listed on the stock exchanges, they should be rated prior to the listing by any of the credit rating agencies designated by SEBI.
  • When offered for subscription a debenture redemption reserve has to be maintained.
  • The period of maturity normally varies from 3 to 10 years and may also be more for projects with a high gestation period.
  • Bonds may be of many types - they may be regular income, infrastructure, tax saving or deep discount bonds. These are financial instruments with a fixed coupon rate and a definite period after which these are
  • redeemed. The fundamental difference between debentures and bonds is that the former is normally secured whereas the latter is not. Hence in general bonds are issued at a higher interest rate than debentures. This avenue of financing is mainly availed by highly reputed corporate concerns and financial institutions.
  • The three main kinds of instruments in this category are as follows: Fixed rate, Floating rate, Discount bonds