NCD & Debenture Issuance Advisory

Companies Act, 2013 read with the Companies (Share Capital and Debentures) Rules, 2014: Rule 18(7)(b) requires every company issuing non-convertible debentures (NCDs) to create a Debenture Redemption Reserve (DRR) out of profits available for dividend, to be used exclusively for redemption of the debentures. The DRR requirement stands at 10% of the value of outstanding debentures, reduced from the earlier 25% requirement by an amendment notified vide G.S.R. 574(E) dated 16 August 2019. This is a stable, settled rule that has been in force since 2019 — issuers and advisors should not treat it as a recent regulatory development, a misdating that appears in some third-party commentary on NCD issuance. Companies structuring an NCD issue should build the DRR requirement into the redemption schedule from the outset, sized against the specific debenture class and issuer category applicable under Rule 18(7). Where the proposed debenture issue takes the company's aggregate borrowings beyond the sum of paid-up share capital, free reserves, and securities premium, Section 180(1)(c) of the Companies Act, 2013 additionally requires the board to obtain shareholder approval by special resolution, with the resolution filed in Form MGT-14 with the Registrar of Companies within 30 days of being passed — a check that applies independently of, and in addition to, the DRR requirement above.

Non-convertible debenture (NCD) issuance is the raising of debt by a company through the issue of the debentures under the Companies Act 2013 and the SEBI (Issue and Listing of Non-Convertible Securities) Regulations 2021 for the listed issues — the board and the members' approvals, the issue document, the allotment and the listing, the debenture trustee and the creation of the security, the credit rating, and the redemption. Under Section 71 of the Companies Act 2013, the company may issue the debentures with the terms the board approves, subject to the SEBI regulations where the issue is listed, and the secured debentures carry the creation of the charge under Section 77 read with the Companies (Registration of Charges) Rules 2014.

The NCD is the company's debt raised from the public or the institutional investors, and the issuance is a regulated process — the rating, the trustee, the security, the disclosures, the listing. The debenture is the instrument through which the company borrows without the bank, and the process is the price of accessing the market. The structure — the tenure, the coupon, the security, the redemption — is the deal the company must get right for the investors it is asking to lend.

The cost of a broken issuance is the failed raise and the regulatory price: the issue that the SEBI observations stop, the security that was never created and the debenture holders who are unsecured, the defaults on the redemption that the structure should have planned. The debenture issue is where the company's credit and its compliance meet the market.

This service is for companies raising debt through debentures. We structure the issue — the tenure, the coupon, the security and the redemption — prepare the approvals and the documents under the Companies Act and the SEBI NCS Regulations 2021, manage the rating, the trustee and the charge creation, coordinate the allotment and the listing, and manage the debenture compliance through the redemption.