Partially Convertible Debenture

Partially Convertible Debenture

Partially convertible debenture


Debentures are capital markets instruments that are used to raise long and medium term funds from public. Debentures are a vital source of finance and issuing debentures is one of the most familiar ways of raising funds.

Types of Debentures

Debentures can be classified into different types on the basis of tenure, security, redemption, convertibility etc. These include convertible, non-convertible, fully or partially convertible, secured, unsecured, zero coupon, callable debentures and so on.

We will discuss only Partially Convertible Debentures in this article.These types of debentures have become extremely popular in India lately. On conversion, debentures change into equity shares and the debenture holders change from lenders to owners.

Features of Partially Convertible Debenture

Partially Convertible Debentures are a kind of Convertible debentures. Convertible debentures are the ones that can be converted into equity shares. Partially convertible have two parts. One is the convertible part that is converted into equity share as per the agreed rate of exchange.

The other part remains as a redeemable debenture that is repaid at the time of expiry of the tenure.

Conversion Ratio of Debenture

The conversion ratio of the partially convertible debentures is decided at the time of the issue of debentures, by the issuer.