Life Insurance Coverage Calculator

Muthoot NCDs – Non Convertible Debentures from Muthoot Financiers

Published On 28 Dec 2011 By . Under: Fixed Deposit. Tags: ,   

What is the meaning of Non convertible debentures or NCDs?

A debenture is a bond issued by a company and not backed by a physical asset or collateral. Some debentures allow the holder to exchange the debenture for company stock. However Non Convertible Debentures are those which cannot be converted to company equity or stock.

Go directly to: Benefits of NCDs | Taxation on NCDs | Muthoot NCDs

Benefits of NCDs

Non Convertible Debentures are relatively safer than stocks. In case the company winds up, claims of NCD holders will be superior to those holding other unsecured assets of the company such as stocks etc. In fact NCDs can be considered to be safer than Company Fixed Deposits as well. Please note that Company Fixed Deposits are different from Bank Fixed Deposits. Read more.

​​​​Disadvantages of Non Convertible Debentures

NCDs are more riskier than bank fixed deposits . While Bank FDs are secured upto a limit of Rs 1 lakh, NCDs do not come with any such assurance.

Non Convertible Debentures are not as liquid as a Bank Fixed Deposit. They come with a lock in period. Though NCDs are listed on stock exchange and can be sold, its not as easy as it sounds. Infact if there isnt much trading happening in the NCD, the bonds might have to be sold at a loss.

Taxation of NCDs

The interest earned from Non Convertible Debentures is taxable in the hands of investor. This means that while no tax is deducted at source, the investor is liable to pay tax on the interest income himself. So if a NCD gives 12 percent returns, post tax yield, if you fall in 30% tax bracket, will be 8.4% only.

non convertible debentures
Source: Economic Times

Muthoot NCDs

Muthoot financiers have a history of almost 72 years and are the largest provider of Gold Loans as on March 2010. NCDs from Muthoot Finance are open for subscription till 7th Jan 2011. They have been given a rating of AA- by ICRA and CRISIL which implies that these instruments carry low risk and are hence safe.

Face value of a single unit of in Rs 1000. Minimum application should be for Rs 5000.

The NCDs can be purchased for a time period of 24 , 36, 60 and 66 months. Interest rate is 13 % for a period of 24 months.

To know more more details about Muthoot NCD and for a comparison with Bank FDs click here

​Its advisable to invest in a NCD only if you can wait till the end of maturity period. Also invest in small amounts rather than making a lump sum investment. Check the rating of the company issuing the NCD. Invest only if the company has sound financials.

Also read BusinessLine’s take on Muthoot NCDs

« 
 »
Get Adobe Flash playerPlugin by wpburn.com wordpress themes
Feedback Form
Feedback Analytics