By April 18, 2021 No Comments

Part-A: Overview of Non-convertible Debentures

Non-Convertible Debentures (“NCDs”) are essentially debt instruments which have a specified repayment timeline and which cannot be converted into equity. NCDs greatly benefit the investors as they offer assured returns, low risk and tax benefits for investors.

NCDs can be issued on a private placement mechanism or a public issue. Now a days private placement mechanism is extensively used for raising funds through NCDs. Most companies (both public and private) and non-banking finance companies (NBFCs) are opting the route of private placement for issuance of NCDs.

Despite the turbulent time in a pandemic induced year and slow business activities, companies have been raising funds through private placement of NCDs. This mechanism is easier for the companies to follow as it provides immediate liquidity to the company raising funds. The traditional method of raising finance through an IPO is a longer and more complex process for the company. Under the private placement mechanism, companies identify a select group of investors and raises finances by issuing them a private placement offer letter. The investors are also assured of their returns due to the fixed repayment timelines attached with NCDs.

Infact there have been a total of 1995 issues of private placement of NCDs, amounting to an issue size of INR 7,71,840 crores (Indian Rupees Seven Lakhs Seventy One Thousand Eight Hundred And Forty Crores)[1] during the financial year 2020-21. The following table shows the increase in volume of issuance of NCDs through private placement in the last 6 (six) years.[2]

S.No. Year Number of issues Amount (in crores)
2015-16 2975 4,58,073.48
2016-17 3377 6,40,715.51
2017-18 2706 5,99,147.08
2018-19 2358 6,10,317.61
2019-20 1787 6,74,702.88
2020-21 1995 7,71,839.98
Total 15198 3754797


It is evident that the companies are utilizing their resources in the process of private placement to raise more and more finances through issuance of NCDs.

All that is required for the company is to have a clear strategy as to how to structure the NCDs and what to offer to the investors. The below mentioned details will help make the company an informed decision regarding the terms and conditions of issuance of NCDs:

  1. Eligibility: Generally there is no specific eligibility criteria for companies to issue NCDs on a private placement basis. However subsequent listing of the NCDs is subject to the eligibility criteria specific to the respective stock exchange. The table below points out the eligibility criteria specific to the National Stock Exchange of India ltd. (“NSE”) [3]:


S.No. Corporates Criteria
Public and private limited companies Paid-up capital of INR 10 crores (Indian Rupees Ten Crores); or
Market capitalisation of INR 25 crores (Indian Rupees Twenty-Five Crores) (In case of unlisted companies – net worth more than INR 25 crores (Indian Rupees Twenty Five Crores)
Credit rating


  1. Fees and expenses applicable: The whole process of issuing NCDs on a private placement basis is an elaborate process and the cost and fees applicable for the same depends upon variety of factors. Some important factors playing a role in determining the fees and expenses incurred in the issuance and listing of NCDs are the location of company, location and value of securitized assets, fees payable to legal and financial advisors and stamp duty payable as per the Indian Stamp Act, 1899. If the company proposes to list the NCDs issued on private placement basis on a stock exchange, the listing fees applicable depends upon the issue size and the applicable fees of the particular stock exchange on which the NCDs are proposed to be listed. The listing fees applicable on NSE can be accessed from here and the listing fees applicable on Bombay Stock Exchange (BSE) can be accessed from here.
  2. Coupon rate: Coupon rate refers to the rate of interest the company offers to pay the debenture holder at a predetermined frequency. Since the companies have to mandatorily have a credit rating, it showcases the correct financial positon of the company and ensures that there are no chances of fraud.A perusal of the latest private placement memorandums /term sheets available here, indicates that nowadays issuers are providing a coupon rate anywhere between the range of 8-12% on issuance of NCDs on private placement basis.

Overall, NCDs are a much safer option both for the company and the investors. Since the public issue of NCDs are relatively more expensive and time-consuming, companies are shifting to the private placement mechanism, and there are positive trends that companies will prefer private placement of NCDs over public issue. Since the pandemic has dampened the spirits of the businesses, but the economy is slowly recovering, and trends show that the issuance of NCDs as a preferred mode of structured debt in India will continue to rise, given the potential return they could provide in times where market conditions have been uncertain.


Part-B: Broad Procedure For Issuance Of Non-Convertible Debentures On Private Placement Basis And Their Subsequent Listing

This Part sets out the broad procedure for (a) issuance of NCDs on a private placement basis; and (b) listing of such NCDs thereafter.

  1. Broad Steps for issuance of NCDs on private placement basis:
  2. Obtain all consents required under agreements to which the issuing company is a party;
  3. Obtain valuation report from a registered valuer to determine market value of the assets to be charged against issuance of NCDs;
  4. Obtain consent of debenture trustee for his appointment;
  5. Convening board/shareholders’ meeting to obtain all necessary consents for performance of all corporate actions;
  6. Execution of all transaction documents including the following:
    1. Debenture subscription agreement;
    2. Debenture trust deed; and
    3. Documents for creation of securities.
  7. Filing of necessary documents and forms with the Registrar of Companies (“RoC”) having jurisdiction;
  8. Circulation of private placement offer letter, opening of bank account, remittance of subscription money, opening of debenture redemption reserve;
  9. Issuance of NCDs;
  10. Convening a board meeting recording the issuance of NCDs; and
  11. Making necessary RoC filings and updating all requisite registers of the company in furtherance of the issue of NCDs.


  1. Broad steps for listing of NCDs issued on a private placement basis
  2. If at the time of issue of NCDs the company’s management has decided to get the NCDs listed post the issue, then simultaneous with the consents take under A (1.) above, the company shall obtain consents and resolutions with respect to listing of the NCDs issued on private placement.
  3. Appointment/ engagement of all necessary intermediaries, namely debenture trustee, registrar and transfer agent, merchant banker/ broker, depository, credit rating agency (as may be applicable).
  4. Obtaining the in-principle approval of the stock exchange on which NCDs are to be listed. For instance, if the issuer is listing the NCDs on NSE, then in-principle approval of NSE shall be required by making an application on the NSE’s Electronic Application Processing System (“NEAPS”) along with the following documents[4]:
    1. Draft disclosure document;
    2. Credit rating letters by registered credit rating agency(ies);
    3. Consent letter from the debenture trustee/s; and
    4. Certification from the company.
  5. Undertaking certain stock exchange specific requirements (for instance, obtaining IDBI Bank unique virtual account number created based on PAN No. of the issuing company. This will be required for payment of fees.)
  6. Signing tripartite agreements with depository, obtaining ISIN by opening demat account.
  7. Allotment of NCDs in the manner listed under Section A of Part B of this note.
  8. Enter into a listing agreement in the prescribed format under the common seal of the issuing company.
  9. For final listing of NCDs, the issuing company shall forward the listing application to the recognized stock exchange[5] within 15 (fifteen) days from the date of allotment of such debt securities along with the following documents[6]:
    1. Credit confirmation / allotment letter (s) received from the depository(ies);
    2. Approval by the board of directors / committee/ authorised persons of allotment of securities along with list of allottees;
    3. Credit rating letter(s) issued by credit rating agency(ies);
    4. Debenture trust deed/ consent letter from the debenture trustee;
    5. Disclosure document;
    6. Confirmation from the debenture trustees that the e-mail ids of the allottees have been received by them from the company;
    7. Certification from the company;
    8. Applicable listing fees to be paid to the stock exchange; and
    9. Securities and Exchange Board of India (SEBI) fees of INR 5000/- (Indian Rupees Five Thousand) per disclosure document.


  1. Undertaking compliances of listed companies

Upon listing of the NCDs issued on private placement basis, the issuer shall qualify to be a listed company as per Section 2 (52) of the Companies Act, 2013 and shall be required to undertake all such compliances which are required to be undertaken by listed companies. Some of such compliances are as follows:

  1. Every listed public company shall prepare and file with the RoC, a report on each annual general meeting;
  2. Appointment of company secretary for secretarial audit;
  3. Appointment of internal auditor to conduct internal audit of the functions and activities of the company; and
  4. Every public listed company shall constitute an ‘Audit Committee’ and a ‘Nomination and Remuneration Committee’ of the board.


For any queries, please contact our team:

Akshat Pande – Founder and Managing Partner –

Richa Bhagat – Senior Associate –

Alpha Partners is a corporate and commercial law firm based out of NCR of Delhi, India. Alpha has been ranked as a recommended law firm for its corporate and dispute resolution practice areas by Legal 500, was awarded the best start up law firm of the year by IDEX legal in 2015 and was ranked as one of the top 10 Most Promising Legal Consultants by Consultant Review . Recently, the firm has also been recognised by IFLR1000 for 2019 edition for M&A and private equity practice areas. For details, please visit

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[4] Additional requirements for issuers not listed on the stock exchange.

  • Certificate of Incorporation/ Registration Certificate under the Act, Rules, Regulations or charter under which the issuer has been established or incorporated or notified.
  • Memorandum of Association and Articles of Association
  • Annual Reports, as per the applicable regulations, for the last three years
  • In case of NBFC, a copy of RBI’s certificate confirming whether the issuer is deposit taking or non-deposit taking NBFC

[5] If NSE is the Designated Stock Exchange, Recovery Expenses Fund, as applicable, in terms of SEBI Circular      No. SEBI/HO/MIRSD/CRADT/CIR/P/2020/207 dated October 22, 2020 (Refer Schedule E hereto for details)

[6] There are certain additional requirements for (i) those issuers not listed on stock exchange; and (ii) those issuers seeking listing of NCDs for the first time on the Exchange.


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