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Convertible & Non-Convertible Debentures: Key Differences

What Is Convertible Debenture?

What Is Non-Convertible Debenture?

Convertible Debentures vs Non-Convertible Debentures: Key Differences

Now that you have read through the two types of debentures go through the following table discussing the differences between convertible and non-convertible debentures to have a clearer concept.

Parameters

Convertible Debentures

Non-Convertible Debentures

Conversion

Can be converted into equity shares partially or fully after a specified time.

Cannot be converted into equity shares until maturity

Types

They can be partially or fully convertible depending upon the agreement at the time of issuing.

These can be secured or unsecured depending on if there is collateral or asset to back these up.

Interest rate

Have a lower rate of interest as these are convertible into equity.

Have a higher rate of interest when compared to convertible debentures.

Value on maturity

The value upon maturity depends on the stock price of that company during that time.

The value remains the same till the maturity period, and the investors earn a steady return.

Dependence on market

If the market goes down, the debenture holders have the option to convert those into equity shares.

During the bad market condition, debenture holders have no option but to wait till maturity to get the returns.

Debenture holders

Convertible debenture holders are investors as well as shareholders of that company.

Non-convertible debenture holders are the only investors of that company.

Risk rate

Less risk as these are convertible into equity shares.

Higher risk as the investors have to wait till maturity to receive a return on their investment.

Now that you have known all the particulars related to debentures, their types and differences between convertible and non-convertible debentures, it will be easier for you to make your investment choice.

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