Non-Convertible Debenture (NCD) is a debt instrument that does not carry an option to convert to equity. They are securities issued by a debtor company, to acknowledge debt. NCD holders receive interest for a fixed duration. Companies issue NCDs if they want to raise capital without the need to issue equity, avoiding dilution for existing shareholders.

1. Secured NCDs – NCDs are backed by the company’s assets. If the company fails to make the payment on time, investors can recover their investment by liquidating the security.

2. Unsecured NCDs – No assets back up the loan. If the debtor company defaults, investors must wait until the company recovers and can pay back the principal amount. The advantage for holders however is that because of the higher risk, unsecured NCDs carry