Guide to Selling Non-Convertible Debentures Converting Shares to Demat Format in India
Investors in India often find themselves in a scenario where they need to convert their non-convertible debentures (NCDs) into a more liquid asset or turn their physical shares into digital or demat format. This comprehensive guide will help you understand the processes involved and provide you with the necessary steps to achieve these objectives.
Step 1: Converting NCDs and Shares to Demat Form
The first crucial step in this process is to convert both your non-convertible debentures and shares into a demat (dematerialized) format. This change ensures that your assets can be easily traded, tracked, and managed electronically.
Contact your Demat Service Provider: Reach out to your current demat service provider or open a brokerage cum demat account with a reputable broker like ICICI, Motilal Oswal, or Geojit Share Services. Submit Physical Certificates: Along with the demat service provider, you will need to submit the physical certificates of your shares and debentures along with a dematerialization form. Overview of Companies Act 2013: Per the Companies Act 2013, all companies are required to issue shares in demat format. If your company, registered under the 1956 act, did not do so, they must have a scheme for converting physical shares into demat form. Contact your company for detailed information and the required forms. You will also need a demat account, which can be facilitated by providers like ICICI, Motilal Oswal, or Geojit Share Services.Step 2: Selling Non-Convertible Debentures
Once your debentures and shares are in demat form, you can sell them through the normal share trading software. Here are the two primary methods:
Method 1: Selling via Stock Exchanges
Company Assistance: The first step in this method is to contact the company to obtain the value of your debentures. It is possible that the company might have redeemed the debentures. If not, they can provide details on how to convert them into the electronic form. Market Monitoring: Once you have confirmed that your debentures are in electronic format, check out the latest prices in the CM segment of the National Stock Exchange (NSE) or the F group in the Bombay Stock Exchange (BSE). Trading via Software: With your debentures in demat form and the current market prices known, you can proceed to sell them via the normal share trading software. You can contact your broker and inform them of your intention to sell, and they will facilitate the process by finding a buyer for you.Method 2: Direct Transfer
This method involves more effort and can be quite costly and time-consuming.
Seek Buyer: You are responsible for finding a direct buyer for your debentures. Company Approval: Upon selling the debentures, you must inform the company about the sale. This method is not recommended unless you have no urgent financial needs.Given the complexity and potential costs, it is recommended to use the first method for efficiency and ease of process.
Financial Security: Debentures are secured with a floating charge, so even if the company faces financial difficulties, your principal amount is safe. Legal Considerations: According to the new Companies Act 2013, companies are prohibited from issuing irredemable debentures, where the principal amount is never repaid throughout the company’s lifetime. Companies that have issued irredemable debentures earlier are advised to convert them to redeemable debentures.Additional Steps
It is advisable to consult an investment advisor to decide whether to sell or hold your debentures based on your specific financial situation and market conditions.
Conclusion
Understanding the processes of converting non-convertible debentures and shares to demat format is crucial in today's digital investment landscape. By following these steps and utilizing the appropriate methods, you can ensure that your assets are easily managed and can be sold when the time comes.