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Optionally Convertible Debentures

Optionally Convertible Debentures The value of a debenture depends upon there fact (i) straight debenture value. (ii) conversion value and (iii) option value. Straight Debenture Value (SDV) Equals the discounted value of the receivable interest principal repayment, if...

Valuation

Valuation The convertible debentures presently in India can he of three types: (i) compulsorily convertible within 18 months, (ii) optionally convertible within 36 months and (iii) convertible after 36 months with call and put features. However, only the first two...

CONVERTIBLE DEBENTURES BONDS

CONVERTIBLE DEBENTURES BONDS Features Convertible debentures give the debenture-holders the right (option) to convert them into equity shares on certain terms. The holders are entitled to a fixed income till the conversion option is exercised and would share the...

Demerits

Demerits The shareholders suffer serious disadvantages such as (a) vulnerability to arbitrary managerial action as they cannot enforce to dividend right to payment in case of redemption. and (b) modest dividend in the context of the associated risk. For the company,...

Merits

Merits The advantages for the investors are: (i) stable dividend. (ii) the exemption investors on preference income to the extent of dividend paid out. The issuing company several advantages, namely, (i) no legal obligation to pay preference dividend and dividend...

Participation Features

Participation Features Preference capital may be participating entitling participation profits, if any, that is, profits after payment of preference dividend and equity dividend at a certain specified. Similarly, it may be entitled to participate in the residual...