Debentures-Basic Meaning

What is Debenture?

A debenture is a document which either creates a debt or acknowledges it

It is a debt security issued by a company (called the Issuer), which offers to pay interest in lieu of the money borrowed for a certain period. In essence it represents a loan taken by the issuer who pays an agreed rate of interest during the lifetime of the instrument and repays the principal normally, unless otherwise agreed, on maturity.

Debentures enable investors to reap the dual benefits of adequate security and good returns
Debentures holders have no right to vote at the meetings of the companies.

Convertible Debentures:
If an option is given to convert debentures into equity shares at the stated rate of exchange after a specified period, they are called convertible debentures. Convertible Debentures have become very popular in India. On conversion the holders cease to be lenders and become owners.