The following are the features of convertible debenture that an investor can expect to notice:
This ratio indicates how many equity shares an investor has received against the number of convertible debentures he or she holds.
It is the actual shares issued and allotted by a company to a debenture holder. This conversion price can depend on many factors like market price, current book value, expected appreciation in the equity share value, and others. So, this conversion price can neither be too high nor too low. Also, a higher conversion price can result in compromised addition to the capital base. The price must be such that it allows investors to gain immediately from the conversion advantage.
A convertible value defines an investor's right to receive equity shares. Thus, one may need to multiply the conversion ratio by the current market price of a single equity share to set the value.
The market price of a convertible debenture depends on the investment value and conversion value of that debenture. Basically, it is the value market attaches to a convertible debenture.
The number of debentures an investor can convert is expressed as a percentage of its face value. Further, the amount allowed for conversion is specified in terms of the number of equity shares per conversion rate.
The value of a coupon depends on the credit quality of an issuer and the prevailing interest rate in the market. Moreover, per the set clause, a company must clear coupon payments either half-yearly or annually during the issue.
It is the sum increase in the value of convertible shares from their initial conversion or investment value.
There is a period that companies set. Only after the expiry of this period their investors can convert their debentures into shares. This usually ranges from a year to 5, i.e., from the date of allotment.