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What Is a Convertible Debenture? A convertible debenture is a type of long-term debt issued by a company that can be converted into shares of equity stock after a specified period. Convertible debentures are usually unsecured bonds or loans, often with no underlying collateral backing up the debt.

Difference between Convertible Debentures and Non-Convertible Debentures. Non-convertible debentures have a fixed value and hence earn fixed returns when they mature. Convertible debentures have a lower rate of interest than non-convertible debentures since holders can convert them into equity shares.

Partially convertible debentures (PCDs) involve redeeming a fraction of the value of the security for cash and converting the other part into equity. A fully convertible debenture (FCD) involves a full conversion of the debt security into equity at the issuer's notice.

Based on convertibility, there are two kinds of debentures which are convertible and non-convertible debentures. Convertible debentures are debentures that can be converted into equity of the company. In case of non-convertible debentures, they cannot be converted into equity shares of the company.

Non-convertible debenture meaning refers to a debt instrument (debenture) that the buyers can not convert to shares or equities at any point of time until maturity. With an NCD investment, buyers can buy or sell the instrument or earn interest payments based on the interest rate set by the NCD issuer.

NCDs are debentures with a feature of convertibility into shares after a certain point of time at the discretion of the debenture holder. The debentures which cannot be converted into shares are called non-convertible debentures (or NCDs).

Since NCDs are more risk-averse and liquid, they are an excellent alternative to stocks if reputable companies issue them.

Non-Convertible debentures are long-term debt instruments issued by companies that carry a fixed interest rate for the investment tenor. The issuer redeems these at maturity and is not eligible for conversion into equity shares at maturity.

Shareholders have a right to participate in the affairs of the company. Debenture holders can't participate in the affairs of the company. Equity shares get the refund only when all liabilities have been paid off. Debenture holders get payment in priority as compared to all the creditors.

A debenture is converted into equity shares. A notice of the conversion is sent, and the debenture holders are asked to return debenture certificates. Secretary carries out the process of allotment of the shares. After allotment, changes have to be made in the Register of charges.