An NCD IPO is a way for companies to raise money from the public by issuing Non-Convertible Debentures (NCDs). NCD IPOs are similar to equity IPOs, but NCDs offer fixed income securities instead of equity shares. Here are the key features of an NCD IPO:
- NCDs offer a predetermined fixed interest rate (coupon rate) that is generally higher than fixed deposits.
- Available in short-term, medium-term, or long-term durations (e.g., 1 year, 3 years, 5 years, etc.).
- Investors receive interest periodically (monthly, quarterly, annually) or cumulatively at maturity.
- Secured NCDs: Backed by company assets, making them safer.
- Unsecured NCDs: No collateral, higher risk but higher returns.
- Listed on NSE/BSE, allowing investors to buy/sell before maturity.
- Price fluctuates based on interest rates and demand.
- Rated by agencies like CRISIL, ICRA, CARE, which indicate the risk level.
- Higher-rated NCDs (AAA, AA) have lower risk but offer lower interest.
- Interest earned is taxable as per the investor’s income tax slab.
- No TDS (Tax Deducted at Source) if held in Demat form.
- Typically starts from ₹10,000 or more.
- Usually offers higher interest rates (8% to 12%) than fixed deposits.
- Unlike convertible debentures, NCDs cannot be converted into shares.
