Debentures FAQs – Imperial Money Insights

At Imperial Money, we believe financial clarity builds financial confidence. Here’s everything you need to know about debentures, how they compare to equity, and how they can support your investment goals.

General FAQs – Equity, Debt & Debentures

Q1. What is the difference between equity and debt?

Equity means ownership in a company. Debt means lending money to a company with the promise of repayment plus interest. Equity offers growth potential; debt offers stability and fixed returns.

Q2. What are debentures?

Debentures are long-term financial instruments through which companies raise money from investors with a fixed interest commitment. Think of them like company-issued loans to the public.

Q3. Are debentures debt or equity?

Debentures fall under the category of debt, not equity. You’re lending money to a company, not becoming its part-owner.

Q4. Why do companies issue debentures instead of shares?

To raise capital without diluting ownership. Debentures help fund growth while keeping control intact.

Q5. How is a debenture different from regular debt?

Debentures are a specific type of debt instrument that are often tradable in the market, rated by credit agencies, and offer fixed interest returns for a defined period. In contrast, regular debt may not have these features and is often held privately.

Q6. What are the risks in equity vs. debt?

• Equity risks: Market volatility, company performance, loss of capital. • Debt risks: Credit risk, interest rate changes, lower liquidity.

Equity FAQs – For Long-Term Growth Seekers

Q7. What are the types of equity shares?

The two main types are common shares, which typically come with voting rights, and preferred shares, which have priority in receiving dividends but usually lack voting rights.

Q8. What are the benefits of investing in equity?

Capital appreciation, dividends, ownership, and voting rights — great for long-term wealth creation.

Q9. Do equity investors get voting rights?

Yes, especially if you hold common equity.

Q10. What is an IPO?

Initial Public Offering – when a company first sells its shares to the public.

Q11. Can equity be converted to debt?

No. But some debt instruments (like convertible debentures) can convert into equity.

Q12. Is equity good for retirement planning?

Yes, but only with proper asset allocation. Equity brings growth, debt brings stability. Combine both wisely.

Debt & Debenture FAQs – Safer Income Options

Q13. What is a secured debenture?

It’s backed by company assets. If the company defaults, you have some protection.

Q14. What is an unsecured debenture?

Not backed by assets — riskier, but often higher-yielding.

Q15. What are convertible debentures?

These can be converted into equity shares after a set period. You start with income, later enjoy ownership.

Q16. What are non-convertible debentures (NCDs)?

These cannot be converted into shares. They’re pure income-generating tools with fixed interest.

Q17. How do you earn from debentures?

You earn through periodic interest payments, known as “coupons,” and by receiving the principal amount back at maturity.

Q18. Are debentures listed on stock exchanges?

Yes, many NCDs and corporate bonds are traded like shares.

Q19. What is the maturity period of debentures?

Usually 3 to 10 years. Ideal for medium- to long-term goals.

Q20. Who can invest in debentures?

Retail investors, NRIs, institutions, HNIs — anyone looking for fixed income options.

Q21. Is interest on debentures taxable?

Yes. Interest is added to your income and taxed as per your slab.

Q22. What is credit rating in debentures?

A score given by rating agencies (like CRISIL, ICRA) that tells how safe the investment is. | 🟢 AAA = safest | 🔴 C or D = high risk

Investor FAQs – Practical Use Cases

Q23. When should I invest in debentures instead of fixed deposits (FDs)?

When you want higher returns with moderate risk. NCDs often offer 1–2% more than FDs, especially in a falling interest rate cycle.

Q24. Are equity-linked debentures suitable for short-term goals?

Yes, for risk-tolerant investors who want to capture equity growth with downside protection.

Q25. How do debentures fit into retirement planning?

Perfectly. Debentures offer fixed income, which can be used for Systematic Withdrawal Plans (SWP) or monthly income post-retirement.

Q26. Can I invest in debentures through Imperial Money?

Yes. We curate high-rated NCDs, bonds, and debt instruments as part of our wealth-building plans. Talk to your advisor to explore current offerings.

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“Debt gives you peace of mind. Equity gives you dreams. The right balance gives you freedom.”

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