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What is Non convertible Debentures NCD?

Most investors in India will be highly inquisitive to know what are NCD and the benefits it offers to Indian investors. Indian investors constantly look for the best non-convertible debentures schemes. Investors are increasingly looking at non-convertible debentures as a good option to diversify their portfolios owing to attractive NCD interest rates compared with other options.

Many investors prefer to invest in low-risk investments. NCDs are a good option for such investors. NCDs are fixed-income debt instruments. In short, you lend money to a company against NCDs issued by them to you. Unsecured and secured non-convertible debentures are the two types of NCDs available to investors. Secured NCDs are more secure than other debt instruments because companies pledge or hypothecate assets as security.

INVEST IN NON CONVERTIBLE DEBENTURES

NCD investment is fast becoming a great investment avenue, especially for risk-averse investors looking for risk-free options of capital appreciation. This is how NCD investment in India happens. Let’s assume a company is seeking funds worth Rs.100 Cr. It will issue 10 lakh non-convertible debentures of the face value of Rs.1000 each.

Thus, in this case, as an investor, you will pay Rs.1000 to the company to buy a single debenture. This is called the principal amount. Every NCD is issued for a fixed period of time, during which the company pays you a fixed interest monthly, quarterly, annually, or a cumulative payment at maturity. The company will pay back the principal to the investors at the end of the tenure along with the interest accrued

BENEFITS OF INVESTING IN NCDS

Indian investors are always on the look-out for upcoming non convertible debentures. Some of the top benefits of investing in NCDs include:

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  • High security
  • Competitive returns
  • Wide choice of options
  • Good payout options
  • High liquidity
  • No TDS

(Note: The rate of interest earned on NCD is taxable. As there is no tax deducted at source (TDS) deduction in NCDs, on sale or maturity the amount of return (if any) gets clubbed in the income of the investor as “income from other sources” and taxed at the applicable income tax rate. Some NCDs from select Navratna PSUs are declared upfront as Tax free. In such issuance, the interest earned by investor is 100% tax free )

CURRENT NCD ISSUES

The current NCD market in India has been buzzing in the past six months with some great schemes hitting the bourses. Some of the latest NCD issues include Tata Capital Housing Finance, Shriram Transport, L& T finance ,ECL finance etc.

Click Here to know more about the upcoming NCDs in India

BUY NCD ONLINE

How to buy NCD online? This is a big question that would come to every investor’s mind. However, given the amount of online trading that happens in today’s day and age, the great news for all those looking to invest in NCDs is that you can also buy NCD online.

All you have to do is to buy it from a registered trader or broker using their online broking platform by opening an investment account with that broker. Brokers provide you with user-friendly NCD investment options to choose from.

Click Here to start investing in Non-Convertible Debentures now

* Tax benefit is for indicative purpose only and it is based on the input provided by the user and may vary based on the inputs provided by the user. Tax slabs are assumed to remain same. Tax benefit is calculated considering that the income is chargeable to tax at the highest slab at 30.9% and the minimum investment in NPS of 50,000 per year. The calculations are made on the assumption that the conditions mentioned in the relevant sections of the Income Tax Act, 1961 are fulfilled. Tax laws are subject to amendments from time to time. The information contained in this calculator does not constitute legal advice or tax advice and users are further advised to consult their tax advisors before making any decision or taking any action. It is clarified that the company will not be responsible for any loss or damage to any one, of any kind, in any manner arising from the action taken based on this calculator.

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Fees and other financial terms and conditions for investing in stock baskets:

  • The client agrees to pay the fees calculated in the manner and on the rates as provided in the Schedule I.
  • The Basket profits or returns would include any dividends, benefits received out of corporate actions.
  • All the costs, fees, charges as per schedule I and expenses of whatsoever nature incurred by us in connection with the acquisition, holding, sale and transfer, in respect of the dematerialized state charges of the Depository Participant, in respect of Securities shall be paid by the Client.
  • A new separate DP account is required for all investors for the basket investments.
  • For new and existing clients, the Demat account will be used only for equity basket and Investor is free to open separate Demat account for self managed investment.
  • During the course of investment, we will invest as close as possible to the basket amount. Some small surplus to be left due to rounding off that amount will be managed /invest/return to the investor as suitable.
  • The stocks in the basket will be as per the discretion of the ACMIIL. These stocks would be reviewed from time to time and the rebalancing, (if any), of the stocks in the basket would be at the discretion of ACMIIL.
  • You are free to exit basket wise or exit from all basket at any point of time. You are not allowed to selectively exit from any stock or add any stock to the basket.
  • In case of a bank mandate, we will need 20% more mandate of the basket amount as the stock price will fluctuate time to time. The amount taken from bank would be actual value of Basket.
  • The Client agrees that in the event of a dispute, the Claims, if any, by the Client cannot exceed the fees paid by the Client for the year for advisory services in Rupee terms.
  • The client agrees that in case of any dispute, the claim and/or disputes will be referred to arbitration as per the Rules, Bye-laws and Regulations of the Stock Exchange where the trade is executed and the circulars/notices issued there under as may be in force from time to time.
  • As a SEBI registered stock broker, we are permitted to act as an adviser. This product is part of our advisory activity.
  • As a SEBI registered stock broker, we are permitted to act as an adviser. This product is part of our advisory activity.

Schedule I

Fees Structure
Nature of FeesFees
Basket FeesINR 300 per basket + GST (Charged upfront)
Advisory Fees (Second year onwards)2% p.a+ GST (Charged upfront on Basket Value)
Approx Transaction Charges0.13%
Note: In Basket fees and Management Fees, GST will be recovered at the applicable rate.
Transaction charges includes Brokerage, STT, Stock Exchange charges, Stamp duty, SEBI Charges & GST

Fees Structure Example:

Suppose Client A has bought 1 basket for 36 months so he will pay INR 300 per basket as Basket fees for 36 months and from 13th month onwards he will pay Advisory fees for 1st basket as one year ends for the basket. So, after completion of one year the client A has to pay the Basket fees (13th month fresh basket) as well advisory fees (1st basket upfront Advisory fees for second year).

Transaction Charges Includes
HeadsRate
STT (Central Govt)0.1% on Transaction Value
Transaction Charges (Stock Exchange)0.0034% on Transaction Value
Stamp Duty & SEBI Charges0.011% on Transaction Value
GST18% on Transaction Charges.
  • I have understood that Investment in securities market is subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future performance and future results. The recommendations made by ACMIIL could be those that are based on its own research or on the advice of a SEBI registered Investment Adviser.
  • I have understood the equity basket fees terms and other financial conditions and the clarifications required by me. I understand that the investment in Equity basket is subject to risk associated with equity investments. I have understood the investment process and other aspects of the product.
  • I hereby agree to participate.

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