Debenture capital refers to the capital raised by a company through the issuance of debentures. Debentures are a type of debt instrument used by companies to borrow money from the public or investors. When individuals or institutions buy debentures, they essentially lend money to the company issuing the debentures.
Unlike shares, debentures do not represent ownership in the company. Instead, they are a form of loan that the company agrees to repay at a specified future date, along with periodic interest payments. Debenture holders are creditors of the company and have a priority claim on the company’s assets in case of bankruptcy or insolvency.
Debenture capital is an important source of long-term funding for companies, and the terms of debenture issuance, including interest rates, maturity dates, and security, can vary based on the agreement between the issuing company and the debenture holders.