By VestAI Research | Last updated: March 2026
Debenture: Meaning, Definition & Indian Stock Market Examples
Unsecured long-term debt instrument issued by a company — backed only by creditworthiness.
What is Debenture?
A debenture is a medium-to-long term debt instrument issued by companies or governments to borrow money at a fixed interest rate. Debentures can be secured (backed by specific assets) or unsecured. They rank above equity shareholders in claims during liquidation but below secured creditors.
Debenture — Indian Stock Market Example
Indian companies regularly issue debentures in the bond market, primarily to institutional investors. SBI, HDFC, and large PSUs have outstanding debenture programmes worth thousands of crores. Retail-accessible debentures include listed NCDs and tax-free bonds issued by infrastructure PSUs like NHAI and REC.
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Analyse with OrionFrequently Asked Questions about Debenture
What is a convertible debenture?
A convertible debenture (CD) can be converted into equity shares at a preset price after a specified period — giving debt safety initially and equity upside later. Fully Convertible Debentures (FCDs) convert entirely to equity. Partly Convertible Debentures (PCDs) convert a portion to equity. These are common in startup financing and FCCB (foreign currency convertible bonds) issued by Indian companies abroad.
What is the priority of debenture holders in a company's liquidation?
Order of priority in Indian liquidation (insolvency under IBC): (1) Insolvency costs; (2) Secured creditors (banks with collateral); (3) Workmen dues (2 years); (4) Unsecured creditors including debenture holders; (5) Government dues; (6) Equity shareholders. Debenture holders recover before equity shareholders but after secured lenders.
Related Terms
NCD
Non-Convertible Debenture — fixed-income bond that cannot be converted to equity.
Interest Coverage Ratio
EBIT divided by interest expense — shows ability to service debt.
Debt-to-Equity Ratio
Total debt divided by shareholder equity — measures financial leverage.
Convertible Bond
Bond that can be converted into equity shares at a predetermined price.
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