Convertible Bonds

A convertible bond is a hybrid debt instrument that gives the bondholder the option to convert the bond into a predetermined number of equity shares of the issuing company, at a specified conversion price and within a defined conversion window. Until conversion, the bond pays regular coupon interest like a conventional bond. Investors benefit from the downside protection of fixed income with the potential to participate in equity upside if the stock price rises above the conversion price. In India, Compulsorily Convertible Debentures (CCDs) and Optionally Convertible Debentures (OCDs) are regulated by SEBI and are commonly used by startups and growth-stage companies to raise capital from private equity and venture investors.