ISSUE ENTRIES KEEP IN MIND TWO POSSIBILITIES OF REDEMPTION OF DEBENTURES

Debentures are a way for companies to raise capital without diluting ownership or giving up control. They can be attractive to investors because they offer a fixed and predictable interest income. The redemption of debentures is the process of repaying the borrowed amount to debenture holders. It can be an important financial decision for a company, as it can improve its creditworthiness, reduce debt, and enhance its financial planning.
Here are some benefits of issuing and redeeming debentures:
For companies
Debentures can help companies raise capital at a cheaper cost than equities. They can also help companies reduce operating costs, and improve their creditworthiness.
For investors
Debentures can be a good option for investors who want a fixed income at a lower risk. They also provide liquidity to investors who want to sell before maturity.
For the market
Debentures can help to keep the solvency ratio at a satisfactory level. They can also help to reduce the expensive external liability for companies that issue debentures.
Some methods for redeeming debentures include:
Lump-sum payment
The company repays the entire debt in one go at the end of the term.
Call option
The company has the right to purchase the debenture on or before the maturity date at a specific price.
Put option
The debenture holders have the right to sell back the debenture to the company at a specific price on or before the maturity period.
Purchasing method
The company buys its debentures from the open market and then immediately cancels them.