4 min Read Mar 22, 2019
Irredeemable debentures, also known as perpetual debentures, are fixed-income debt instruments issued by companies that have no fixed maturity date — meaning the issuer is under no obligation to repay the principal amount to the debenture holder within any specified period. Holders receive periodic interest (coupon) payments indefinitely, but cannot demand repayment of the principal from the issuer. Irredeemable debentures are rare in modern corporate finance but were more common historically. In Indian capital markets, the closest contemporary equivalent is the AT1 (Additional Tier 1) bond issued by banks — a perpetual, loss-absorbing instrument that pays a fixed coupon but can be written down or converted to equity if the issuing bank's capital ratios fall below regulatory thresholds. The pricing of irredeemable debentures is theoretically simple: Value = Annual Interest ÷ Required Rate of Return — making them highly sensitive to changes in interest rates, similar to long-duration fixed-rate bonds.
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