New Delhi: Kotak Mahindra Bank, which is a private lender gave its approval for the issuance of unsecured, redeemable, non-convertible debentures (NCDs) on a private placement basis. the banking entity is planning to raise funds amounting to rs 7,000 crore during the Financial Year 2023-24, the bank states in a regulatory filing.
Adding further the filing said, “In this regard, the Share Transfer and Other Matters Committee of the Board of Directors of the Bank has been authorised to, inter alia, finalise the structure and the terms and conditions of the issue (including the timing of the issue, tenure, coupon/interest rate, schedule of re-payment/interest/coupon rate, security, any right/interest/privileges attached with the NCDs, etc).”
What are NCDs?
Non-convertible Debenture (NCD) is a form of debt instrument issued by companies willing to raise funds from public or institutional investors. It is a fixed-income instrument within a specified maturity period and carries a prearranged coupon or interest rate.
These instruments differ from convertible debentures in terms of Convertibility, which means NCDs cannot be converted into equity shares of the issuing company. They are considered debt instruments during their tenure.
Through issuing NCDs, companies raise long-term capital by borrowing money from investors and in return, they promise to repay the principal amount along with periodic interest payments.
NCDs are reviewing investments as compared to other equity shares as they offer fixed rates of returns and hold a higher priority when it comes to repayments in case of the company’s liquidation. However, before investing in such instruments, investors should always look at the credit ratings of the firm which calculates the potential to raise cash from its internal and external operations.
(Disclaimer: The above information is provided for mere reading purposes and does not account for any financial advice. It is recommended that individuals seeking investment advice should consult with their financial advisors.)
