Company debentures are long-term fixed-income debt instruments issued by corporate entities — as opposed to government bonds — to raise capital from investors in the public or private market. In India, company debentures are issued by listed and unlisted companies and take two primary forms: Non-Convertible Debentures (NCDs) — which remain as debt throughout their tenure and are redeemed at face value at maturity — and Convertible Debentures — which can be converted into equity shares of the issuing company upon maturity or at the option of the holder or issuer. NCDs can be secured (backed by specific company assets as collateral, providing additional protection to investors) or unsecured (backed only by the company's general creditworthiness). SEBI regulates publicly issued NCDs and requires minimum investment-grade credit ratings, mandatory listing on BSE or NSE for public issues, appointment of a debenture trustee, and compliance with SEBI's ILDS (Issue and Listing of Debt Securities) Regulations. For Indian investors, company debentures offer higher yields than government bonds (the credit spread compensating for default risk) while being more liquid than fixed deposits when listed on exchanges. The risk hierarchy is: secured NCDs are safer than unsecured NCDs, which carry higher default risk but offer higher coupon rates — the IL&FS NCD default in 2018 was a landmark event that highlighted credit risk in Indian corporate debenture investing.
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