Calculation of Discount on Issue of Debentures by HDC Ltd

Given information:
- HDC Ltd issued 10000 debentures of Rs 100 each
- The issue price was Rs 94 per debenture
- Coupon rate or interest rate on debentures is 12%
- Debentures are redeemable by drawings in 2 years and the balance in 4 years
- The first redemption will occur on 31st December 2007

To calculate the discount on issue of debentures by HDC Ltd, we need to follow these steps:

Step 1: Calculate the total amount of money raised by HDC Ltd through the issue of debentures
Total amount = 10000 x 100 x 94 = Rs 94,00,000

Step 2: Calculate the total interest payment that HDC Ltd will have to make on these debentures
Total interest payment = Coupon rate x Face value x Time
= 12% x 100 x 2 + 12% x 100 x 4
= Rs 12000 + Rs 24000
= Rs 36000

Step 3: Calculate the total amount HDC Ltd will have to pay back to debenture holders upon redemption
Total amount payable = Face value x Number of debentures
= 100 x 10000
= Rs 10,00,000

Step 4: Calculate the discount on issue of debentures
Discount = Total amount raised - Total amount payable
= Rs 94,00,000 - Rs 10,00,000
= Rs 84,00,000

Therefore, the discount on issue of debentures by HDC Ltd is Rs 84,00,000.

Explanation:
- A debenture is a long-term debt instrument that is issued by companies to raise funds from the public.
- HDC Ltd issued 10000 debentures of Rs 100 each at a price of Rs 94 per debenture. This means that the company received Rs 94 for every Rs 100 of face value of the debenture.
- The difference between the issue price and face value is called the discount. In this case, the discount is Rs 6 per debenture.
- The coupon rate or interest rate on the debentures is 12%, which means that HDC Ltd will have to pay Rs 12 per year for every Rs 100 of face value of the debenture.
- The debentures are redeemable by drawings in 2 years and the balance in 4 years. This means that HDC Ltd will have to pay back the debenture holders in two tranches, with the first redemption occurring on 31st December 2007.
- The total amount of money raised by HDC Ltd through the issue of debentures is Rs 94,00,000.
- The total interest payment that HDC Ltd will have to make on these debentures is Rs 36,000.
- The total amount HDC Ltd will have to pay back to debenture holders upon redemption is Rs 10,00,000.
- Therefore, the discount on issue of debentures by HDC Ltd is Rs 84,00,000, which represents the amount of money that the company received from investors over and above the face value of the debentures.