DEBENTURES According to Companies Act 1956 “Debenture includes debenture stock, bonds and any other securities of company, whether constituting a charge on the assets of the company or not”. Characteristics:- Certificate of indebtedness specifying date of redemption & interest rate Fixed rate of interest / coupon rate Redemption (creation of sinking fund) Indenture – trust deed between the company & debenture trustee
Types of debentures :
Types of debentures Classified on the basis of Security & convertibility Secured or Unsecured (property involvement) Fully convertible – carries low interest rate Partly convertible Non-convertible
BONDS Long term debt instrument ,promises to pay a fixed annual sum as interest for specified period of time Features:- Face value, issued at par or discount Fixed / floating interest rate Specified maturity date Stated redemption value Traded in the stock market
Types of Bonds :
Types of Bonds Secured bonds & unsecured bonds Perpetual bonds & redeemable bonds Fixed interest rate bonds & floating interest rate bonds Deep discount bonds – issued by IDBI & ICICI Capital indexed bonds Zero coupon bonds – traced in U.S security market
Zero coupon bonds :
Zero coupon bonds E.g. Present value=Face value of the bond (1+R)n A bond matures in 20 years time with the face value of Rs.50,000 would be sold for Rs.5185 to give a return of 12 %.
WARRANTS Is a bearer document of title to buy specified number of equity shares at a specified price.
INVESTMENT INFORMATION :
INVESTMENT INFORMATION International Affairs National Affairs Industry information Company information Stock market information
Investment Avenues :
Investment Avenues Financial Securities Traditional non-security investments
Negotiable Securities Variable income Securities Fixed income Securities Equity Shares Growth shares Income shares Defensive shares Cyclical shares Speculative shares Preference shares Debentures Bonds Post-office Savings Certificates Govt. securities (gilt edged) Money market securities Treasury bills Commercial Papers iii. Certificate of deposits
Non-Negotiable Securities Deposits Tax sheltered Savings schemes Life insurance Bank deposits Post office deposits NBFC deposits Public Provident Fund scheme National savings scheme National savings certificates.
Mutual Fund Open ended schemes Close ended schemes Growth schemes Income schemes Balanced schemes Money market schemes Tax savings schemes Index schemes
OTHERS REAL ASSETS (gold & silver) ANTIQUES REAL ESTATE ARTS
Investment Process :
Investment Process Investment policy Analysis Valuation Portfolio construction Portfolio Evaluation Investible funds Objectives Knowledge Market Industry Company Intrinsic value (book value of shares) Future value Diversification Debt& equity diversification Industry diversification Company diversification Selection & Allocation Appraisal Revision