Debentures and their Appeal to Investors and Companies​​

Nikhil Karle
School of Law, NMIMS Navi Mumbai, India.

Volume IV, Issue I, 2021

Recently, many large companies such as IIFL Finance, the Raymond Group, Muthoot Finance, and Indian oil have announced that they will be issuing large amounts of debentures in the near future. The aim of this paper is to be a comprehensive study of the concept of debentures. Debentures, also known as bonds, are a type of debt instrument that is issued by companies in order to raise capital. Debentures are unique, in that they are a debt instrument that is not backed by any collateral, however, despite this, they are considered to be a safe investment.

This paper seeks to explore the various types of debentures that can be issued by a company and the differences between debentures and shares. It also looks into whether companies should issue debentures in place of share, and in which situations this can be preferrable. The author also tries to understand the steps taken by the company with respect to the payment of interest, and redemption of debentures. Then, the author explores debentures from the perspective of investors, and looks into the remedies available to debenture holders in case of default by the company. Finally, the author looks into whether prospective investors prefer investing in debentures over shares, and their reasons for the same.

Keywords: Debentures, Bonds, Investors, Issuing Company, Debt Capital, Interest Rate, Redemption, Maturity, Trading, Security, Trustee