The DNA of an NCD is that of a corporate bond. This means the company raises money from you and you in return earn regular interest as income against your investment.
These NCDs are listed on the stock exchange, which means you are free to trade in it like any other secondary market instrument. As an investor it is your choice to either accumulate more debentures or sell them before their maturity. The price of an NCD will depend mainly on interest rates.
Though it is a debenture, unlike other debentures you cannot convert it into equity at the end of its tenure. There are two types of NCDs that can be on offer. You can have a secured NCD or an unsecured NCD. Secured NCDs, as is evident from the name itself, is an instrument that has underlying assets that can be liquidated to repay holders of this security in case there is a problem.
An unsecured NCD on the other hand is a financial instrument that does not offer any such guarantee. Therefore, if something goes wrong, then the investor will not get back the investment. Understandably, this is a kind of instrument that carries a higher rate of interest.
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
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- SBI Magnum Tax Gain Scheme 1993 Invest Online
- Sundaram Tax Saver Invest Online
- Edelweiss ELSS Invest Online
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