Bonds and Debentures

SUBJECT : FINANCIAL MANAGEMENT
TOPIC : (1) BONDS

(2) DEBENTURES
(3) TERM LOAN
SUBMITTED BY : GANESH SUTHAR (19BSP0933)

DEEP DOSHI (19BSP0766)
BHAGYASHREE PAWAR (19BSP0653)
AYUSH MISHRA (19BSP0604)
DEEPALI SINGH (19BSP0777)
GARIMA KAUSHIK (19BSP0937)
ASHISH NAYAK (19BSP0531) GUIDED BY :
ANUJ BHATT (19BSP0435)
ARPITA MUNDHARA (19BSP0503) NAISHA SUJAN
BONDS
 A bond is fixed income instrument.
 A bond holder is a debtholder or a creditor of the

company.
 Bonds prices are inversely correlated with interest rates.
 Bonds have a maturity date at which point the principal

amount must be paid back in full or risk default.
2
CHARACTERISTICS OF BONDS
 THE COUPON RATE
 THE MATURITY DATE
 FACE VALUE
 COUPON DATE
 THE ISSUE PRICE
3
Types of bonds
 Fixed rate bonds

 Floating rate notes
 Zero-coupon bonds
 High-yield bonds
 Convertible bonds
 Exchangeable bonds
 Subordinated bonds
 Government bond

4
BOND MARKET IN INDIA
Primary Market Secondary Market
5
Advantages
 Fixed interest rate
 Diversification
 Secured
 Capital formation
6
Risk involved in investment of bonds
• Default risk
• Reinvestment risk
• Market risk
• Selection risk
• Liquidity risk
7
 A Debenture is a unit of loan amount
 When a company intends to raise the loan amount from

the public it issues debentures. It bears the date of
redemption, rate and mode of payment of interest.
 A person holding debenture or debentures is called a

debenture holder.
 A debenture holder is a creditor of a company.
 A debenture is a document issued under the seal of a

company.
8
(1) ON THE BASIS OF TRANSFERABILITY OR RECORDS
(A) REGISTERED DEBENTURES (B) BEARER DEBENTURE
(2) ON THE BASIS OF REDEEMABILITY
(A) REDEEMABLE DEBENTURES (B) IRREDEMABLE DEBENTURES
9
(3) ON THE BASIS OF SECURITY
(A) SECURED DEBENTURES (B) UNSECURED DEBENTURES
(4) ON THE BASIS OF CONVERTABILITY
(A) CONVERTIBLE DEBENTURE (B) NON CONVERTIBLE DEBENTURES
(a.) FULLY CONVERTIBLE DEBENTURES

(b.) PARTIALLY CONVERTIBLE DEBENTURES
10
 FEATURES OF DEBENTURES:
• Maturity
• Claims on Income
• Claims on Assets
• Control
• Call Feature
11
 MERITS AND DEMERTIS OF DEBENTURES
MERITS: DEMERITS:
• Fixed Rate of Income • No Voting Rights
• Fixed Maturity Period • Creditors and not Owners
• Secured Investment. • Price Fluctuation
• Burden on Company
• Tax Benefits.
• Liquidity
12
 ISSUE OF DEBENTURES:
 The procedure of issuing Debentures by a company includes:
• The company starts by releasing a prospectus declaring the debenture
issuance
• The interested investors, then, apply for the same.
• The company may need the entire amount while applying for the
debentures or may ask for installments to be paid while submitting the
application, on allotment of debentures or on various calls by the company.
• The company can issue debentures at a par, at a premium or at a discount as
explained below.
13
 DIFFERENT WAYS FOR ISSUING OF
DEBENTURES:
• Issue of debenture at Par
• Issue of debenture at Premium
• Issue of debenture at Discount
14
CREDIT RATING
Credit rating is an analysis of the credit risks associated with a financial instrument or a
financial entity.
It is a rating given to a particular entity based on the credentials and the extent to which
the financial statements of the entity are sound, in terms of borrowing and lending that has
been done in the past.
15
RATINGS GIVEN BY CRISIL
• CRISIL AAA
• CRISIL AA
• CRISIL A
• CRISIL BBB
• CRISIL BB
• CRISIL B
• CRISIL C
• CRISIL D
16
CREDIT RATING AGENCIES IN INDIA
• 1. Credit Rating Information Services of India Limited (CRISIL)
• 2.ICRA Limited
• 3.Credit Analysis and Research limited (CARE)
• 4.Brickwork Ratings (BWR)
• 5.India Rating and Research Pvt. Ltd.
• 6.Small and Medium Enterprises Rating Agency of India (SMERA)
17
Term Loan
The Term Loan is a loan from bank for a specific
amount that has a specified repayment schedule and
either a fixed or floating interest rate. It is also called as
a term finance which means the money raised through
the term loans is generally repayable in regular
payments i.e. fixed number of installments over a
period of time.
18
19
Short Term.
As the name suggests short term loans are which
have a short tenure. It is normally for one year.
Long Term.
A long term loan has the longest repayment period,
spanning 1 to 25 years. Long term finance is affordable.
20
21
 Features of Term Loans.
1. Security
2. Obligation
3. Interest
4. Maturity
5. Convertibility
22
 Merits of Term Loans
 Tax Benefit
 Flexible
 Control
 Secured
 Regular Income
23
 Demerits of Term Loans
Obligation
Risk
Interference
Negotiability
24

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SUBJECT : FINANCIAL MANAGEMENT

TOPIC : (1) BONDS

SUBMITTED BY : GANESH SUTHAR (19BSP0933)

 A bond holder is a debtholder or a creditor of the

 Bonds prices are inversely correlated with interest rates.

 Bonds have a maturity date at which point the principal

 THE MATURITY DATE

 THE ISSUE PRICE

 Fixed rate bonds

Primary Market Secondary Market

 When a company intends to raise the loan amount from

 A person holding debenture or debentures is called a

 A debenture holder is a creditor of a company.

 A debenture is a document issued under the seal of a

(A) REGISTERED DEBENTURES (B) BEARER DEBENTURE

(2) ON THE BASIS OF REDEEMABILITY

(A) REDEEMABLE DEBENTURES (B) IRREDEMABLE DEBENTURES

(A) SECURED DEBENTURES (B) UNSECURED DEBENTURES

(4) ON THE BASIS OF CONVERTABILITY

(A) CONVERTIBLE DEBENTURE (B) NON CONVERTIBLE DEBENTURES

(a.) FULLY CONVERTIBLE DEBENTURES

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