Question

What is a ‘Convertible Debenture’?

Answer 1

Convertible debentures can be converted into equity shares or other instruments at a stipulated rate of exchange at the choice of debentureholders or the corporation after a time. ‘Partly Convertible Debentures’ are divisible into shares only partially. ‘Fully Convertible Debentures’ convert entirely into shares. According to SEBI guidelines, debentureholders must have the option to convert at or after 18 months from allotment but before 36 months. Investors like convertible debentures because they offer liquidity, safety, capital appreciation, and guaranteed return.