A debenture is a type of debt instrument that is not secured physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond to secure capital. Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company's general meetings of shareholders, but they may have separate meetings or votes.

Convertible and non convertible debentures

Convertible debentures are bonds that can convert into Equity shares of the issuing corporation after a specific period of time. These types of bonds are the most attractive to investors because of the ability to convert, and they are most attractive to companies because of the low interest rate.

Non-convertible debentures are debentures that cannot be converted into equity of the issuing corporation. To compensate, investors are rewarded with a higher interest rate when compared to convertible debentures.

Equity

Equity is a source of funding in which the company offers to the general public to invest in the company in return of the ownership in the form of shareholding in the company. Generally, Equity is cheaper than debt, it is the owners fund and we don’t need to pay heavy interest on a monthly basis, irrelevant to the profits and loses of the organisation. But on the other hand, the lender does not have a claim to equity in the business, debt does not dilute the owner's ownership interest in the company.

So its all depends upon the structure and preferences of the organisation whether to choose the equity or debt. It is preferable that this decision will be taken in the guidance of an expert Who can conclude the pros cons of the both as per the preferences and nature of the organisation .

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