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CS Executive · Capital Market and Securities Laws · Basics of Capital Market

Kaveri Infra Ltd. issues instruments carrying a fixed 9% annual coupon, repayable after 5 years, with holders having no voting rights and ranking as creditors. A trustee protects the holders. Which classification is most accurate?

These are non-convertible debentures, a long-term debt instrument of the capital market. They pay fixed interest, are repaid at maturity, give holders creditor rather than ownership status, and have a trustee. Equity shares and treasury bills do not match these features.

  1. ANon-convertible debentures, a debt instrument of the capital marketCorrect
  2. BEquity shares with a fixed dividend
  3. CTreasury bills in the money market
  4. DEquity-linked warrants

Explanation

Fixed coupon, a 5-year tenor, creditor status and a debenture trustee all point to debentures, and with no conversion feature they are non-convertible. Equity shares do not give fixed contractual interest. Treasury bills are government securities of up to 364 days, so a 5-year corporate instrument is not one.

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