News Excerpt:
Brookfield Asset Management-backed India Infrastructure Trust (India Infra InvIT) will raise Rs 6,452 crore via Non-Convertible Debentures (NCDs).
More details on news:
- India Infrastructure Trust will raise Non-Convertible Debentures (NCDs) to refinance debt maturing at the Special Purpose Vehicle (SPV) level to acquire the East-West gas pipeline (EWP) from Reliance Industries Holdings.
- EWP is the sole pipeline connecting the gas-producing eastern coast to the western coast of India.
- It also connects key industrial clusters and is connected to GAIL’s trunk and other pipelines.
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Debentures
- Debentures are long-term financial instruments which acknowledge a debt obligation towards the issuer.
- Some debentures have a feature of convertibility into shares after a certain point of time at the discretion of the owner.
- The debentures which can't be converted into shares or equities are called non-convertible debentures (NCDs).
- Non-convertible debentures are used as tools to raise long-term funds by companies through a public issue.
- To compensate for this drawback of non-convertibility, lenders are usually given a higher rate of return compared to convertible debentures.
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Special Purpose Vehicle (SPV)
- A Special Purpose Vehicle (SPV) as the name says, is formed for a specific purpose. The name SPV is given to an entity which is formed for a single, well-defined and a narrow motive.
- Its powers are limited and its life is destined to end when the purpose is attained.
- An SPV can only be formed for fulfilling any lawful purpose and cannot be formed for activities to be undertaken which are prejudicial or opposed to public policy.
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