Define: Convertible Debenture

A convertible debenture is a type of debt instrument issued by a company that can be converted into equity shares at a later date.

When an investor purchases a convertible debenture, they receive a fixed interest payment for a specified period. At the end of the term, the investor has the option to convert the debenture into equity shares of the issuing company.

Convertible debentures offer the potential for higher returns compared to traditional fixed-income investments. They also provide the opportunity to participate in the company’s growth if the debentures are converted into equity shares.

Yes, convertible debentures are typically available to both individual and institutional investors. However, certain regulations and restrictions may apply depending on the jurisdiction and the specific offering.

The main difference is that a convertible debenture can be converted into equity shares, whereas a regular debenture does not have this conversion feature.

The conversion price is usually predetermined and specified in the debenture agreement. It is typically based on the market price of the company’s shares at the time of issuance.

If you choose not to convert your debentures, you will continue to receive the fixed interest payments until the maturity date, at which point the debentures will be redeemed for their face value.

In some cases, the company may have the right to force conversion of the debentures if certain conditions are met. This is usually outlined in the debenture agreement.

Convertible debentures carry a certain level of risk, as their value can fluctuate based on the performance of the issuing company. It is important to carefully evaluate the financial health and prospects of the company before investing.

Tax implications can vary depending on the jurisdiction and the specific terms of the debenture. It is advisable to consult with a tax professional to understand the potential tax consequences of investing in convertible debentures.