Issue of Debentures

Debentures are long-term debt instruments issued by companies to raise funds from the public or institutional investors. Here is a detailed explanation of the issue of debentures:

Types of Debentures
- Companies can issue different types of debentures such as secured, unsecured, convertible, non-convertible, redeemable, and irredeemable debentures.
- Secured debentures are backed by assets of the company, while unsecured debentures are not.

Process of Issuing Debentures
- Companies need to follow certain procedures to issue debentures, such as obtaining approval from the board of directors and shareholders.
- Companies also need to prepare a prospectus containing all relevant information about the debentures being issued.

Interest Payment
- Companies are required to pay fixed interest on debentures at regular intervals, which is a liability for the company.
- Interest payments on debentures are tax-deductible expenses for the company.

Redemption of Debentures
- Companies need to redeem debentures on maturity by repaying the principal amount to debenture holders.
- Companies can also redeem debentures before maturity through a call option.

Security for Debentures
- Secured debentures are backed by specific assets of the company, which act as security for debenture holders.
- In case of default, debenture holders have the right to recover their dues by liquidating the assets.

In conclusion, the issue of debentures is an important method for companies to raise long-term funds, but it also comes with certain obligations and responsibilities towards debenture holders. Companies need to carefully consider the terms and conditions of debentures before issuing them to investors.