Non-Convertible Debentures (NCDs) are fixed-income instruments issued by companies to raise long-term funds from investors. Unlike convertible debentures, NCDs cannot be converted into equity shares of the issuing company. Instead, investors receive a fixed rate of interest over a specified tenure, making NCDs a preferred choice for those seeking stable returns with moderate risk.

In an NCD, the issuing company borrows money from investors and promises to repay the principal amount along with interest at predefined intervals. These instruments are regulated by the Securities and Exchange Board of India (SEBI) and are often listed on stock exchanges, providing liquidity to investors who may wish to trade them before maturity.

NCDs can be classified into two types ó secured and unsecured. Secured NCDs are backed by the companyís assets, offering an added layer of safety to investors in case of default. Unsecured NCDs, on the other hand, carry higher risk as they are not asset-backed but often offer higher interest rates as compensation.

The interest rate or coupon of an NCD depends on the issuerís credit rating and prevailing market conditions. Ratings from agencies like CRISIL, CARE, or ICRA help investors assess the creditworthiness of the issuer. Higher-rated NCDs usually offer lower returns but come with greater safety, while lower-rated ones may promise higher yields with increased default risk.

Before investing, investors should evaluate factors such as the companyís financial health, credit rating, tenure, and interest payment frequency. NCDs can be part of a diversified portfolio for investors aiming for steady income, especially when compared to traditional fixed deposits. However, they should be chosen carefully after assessing risk appetite and liquidity needs.