India has undergone a paradigm shift owing to its competitive stand in the world, The Financial services majorly contributed in economic growth & development in recent years. Bonus Debentures were first issued by Hindustan Lever Limited way back in 2001. Bonus Debentures are not popular like bonus shares in Indian economy. A bonus debenture is a free debt instrument issued to a company’s shareholders as a reward in proportion of their shareholding by capitalising the amount of reserves and surplus. When the company declares a bonus debenture, shareholders will receive bonds from the company for a specific face value. Interest will be paid on these debentures every year. They will be redeemed after a specific period, when you will receive a lump-sum payment. Recently NCLT has approved issuance of bonus debentures by the Britannia Industries Limited to its Shareholders, which was announces in 2018. Bonus Debenture have some benefits for the company like it does not entail an immediate large cash outgo, that means the money, until the maturity of the instrument, may be used to fund new projects or acquisitions. There is neither equity dilution unlike in the issue of bonus shares. aAlso, interest paid on debentures can be claimed as an expense by the company thereby helping reducing tax incidence.
