InvestorQ : What are secured and unsecured NCDs?
Nishita Gala made post

What are secured and unsecured NCDs?

leah Diaz answered.
2 years ago

Non-convertible debentures (NCDs) are long-term financial instruments that are fixed-income investments. They are used as tools to raise long-term capital by companies through public NCD issuance.

There are two main type of NCDs:

1. Secured NCD: Secured NCDs are those that are backed by the company that is issuing the NCD. This means that the company has an obligation to repay the amount borrowed from investors.

2. Unsecured NCD: As the name suggests, unsecured NCDs are those that do not have the guarantee of the company repaying its dues. Hence, it is the relatively riskier option among the two NCDs.

As an investor, if you have a low risk appetite, you should opt only for secured NCDs. However, if you want to earn better returns, you could contemplate invetsing in unsecured NCDs, but please note that there will be no guarantee of you getting your capital amount back in case the company issuing unsecured NCD goes bankrupt.