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Non-Convertible Debenture (NCD) is a medium for companies to raise money from the market. Just like companies raise money through IPO, they bring NCD offers. But one big difference is that the money raised from NCDs is a loan. The company takes a loan according to its need and gives interest to the investors for a fixed period on this money. Rahul Jain, President & Head of Edelweiss Personal Wealth, explains that according to the size of the company, interest is available on the loan. NCD’s offer of reputed and big companies can come at low interest. Small companies get more interest on NCDs. But in the desire for more interest, you should not invest money in such a company where your money gets sunk.
Do not invest in NCDs on the basis of interest only. Rahul Jain’s advice is to look at the company’s reputation and work. There are two types of NCDs- Secured and Unsecured. Retail investors should choose Secured NCDs only because it has the security of the company. If the company is closed, the investors get the money after the process of bankruptcy and insolvency. It is important to check the credit rating of those companies whose NCDs are planning to invest.
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