A Non-Convertible Debenture (NCD) private placement in India is a structured process through which a company raises debt capital directly from up to 200 identified investors — institutional investors, AIFs, family offices, and HNIs — by issuing fixed-income instruments at a defined coupon rate, tenure, and security structure, without offering them to the general public. The process is governed by the Companies Act 2013, the SEBI (Issue and Listing of Non-Convertible Securities) Regulations 2021, and applicable RBI directions for NBFCs. A well-structured private placement, with the right advisor, takes 45-90 days from mandate to disbursement.
Understanding the process — what happens at each stage, who is involved, and what the borrower must prepare — is the starting point for any business considering NCD-based fundraising.
Stage 1 — Pre-issuance eligibility and structuring (Days 1-15)
Before any investor is approached, the borrower and its advisor must establish that the company is eligible to issue NCDs and determine the right instrument structure for the specific requirement.
Eligibility check: The company must not have defaulted on any debt repayment, interest payment, or regulatory obligation in the prior 12 months. Listed companies that already have listed NCDs outstanding must list any new NCD issuance on a stock exchange — unlisted issuances are not permitted for entities with existing listed debt.
Instrument structuring: This is where the advisor's expertise matters most. The NCD structure covers: the principal amount, the coupon rate (fixed or floating), the tenure, the repayment structure (bullet at maturity vs amortising), the frequency of interest payment (monthly, quarterly, or semi-annually), any put or call options, and the security package (what assets back the NCD and what is the priority of the charge).
The structuring decisions are not arbitrary. They are designed to match the borrower's cash flow profile, satisfy the investor's return and security requirements, and ensure the instrument is legally and regulatorily compliant. Getting this wrong creates problems at every subsequent stage.
Credit rating mandate: Every privately placed NCD must be rated by at least one SEBI-registered credit rating agency — CRISIL, ICRA, CARE, India Ratings, or Acuite. The rating mandate is given first because the rating affects the coupon rate and investor appetite. An unrated NCD cannot be privately placed under the current regulatory framework.
Stage 2 — Legal and regulatory preparation (Days 10-25)
Board resolution: The company's board must pass a special resolution authorising the NCD issuance — specifying the aggregate amount, the instrument type, and the terms. This resolution must be filed with the Registrar of Companies.
Debenture trustee appointment: For any secured NCD, a SEBI-registered debenture trustee must be appointed before the issuance. The debenture trustee acts on behalf of NCD holders — monitoring the security, ensuring the borrower complies with covenants, and taking enforcement action in the event of default. Major debenture trustees include IDBI Trusteeship, Catalyst Trusteeship, and Beacon Trusteeship. The debenture trustee executes a Debenture Trust Deed (DTD) with the borrower that defines their rights and obligations.
Private placement offer letter (PAS-4): The Companies Act requires the company to issue a standardised offer document — Form PAS-4 — to each identified investor. This contains the company's financial information, the instrument terms, and the use of proceeds. The PAS-4 is not a full prospectus but must contain adequate disclosure for the investor to make an informed decision.
Security creation: For secured NCDs, the security must be legally created and perfected before disbursement. This involves executing a mortgage or charge document, registering the charge with the Registrar of Companies (Form CHG-1 for most charges), and, where applicable, notarisation and stamp duty payment. Security creation is often the longest step in the process — stamp duty rates vary by state, and the registration process involves coordination between the company, its lawyers, and the ROC.
Stage 3 — Investor placement (Days 15-45)
The advisor identifies and approaches the specific investors best suited to the NCD's credit profile, coupon, and tenure. For a well-structured NCD in the ₹30-200 crore range, the investor universe includes:
Category II AIFs: Private credit funds registered with SEBI as Category II AIFs are the most active institutional buyers of privately placed NCDs from mid-market Indian companies. They have dedicated credit teams, defined sector mandates, and efficient decision-making processes.
Family offices: Large Indian family offices with dedicated treasury and investment functions are active buyers of NCDs from businesses in sectors they know — FMCG families buying food business NCDs, real estate families buying developer NCDs, pharma families buying healthcare NCDs.
NBFCs: Some NBFCs subscribe to NCDs from other NBFCs or from corporate borrowers where the credit profile aligns with their portfolio.
The placement process involves sharing the PAS-4 and a credit information memorandum with selected investors, conducting a management presentation (often called a "management Q&A"), negotiating final terms, and receiving binding subscription commitments.
Stage 4 — Allotment, ISIN, and listing (Days 40-70)
Once subscriptions are received, the company allots the NCDs to subscribers within 60 days of issuing the offer letter. The company files PAS-3 (allotment return) with the ROC and applies for an ISIN (International Securities Identification Number) from NSDL or CDSL. NCDs are issued in dematerialised form only — no physical certificates.
If the NCD is to be listed (mandatory for entities with other listed NCDs, optional for others), the company applies to BSE or NSE for listing and submits the required disclosure documents. Listing provides secondary market liquidity to investors — an important feature for AIFs and institutional investors who may need an exit before maturity.
Stage 5 — Disbursement and ongoing compliance
Following successful allotment, the investor transfers funds to the designated subscription account and the company drawdowns the capital. Ongoing obligations include: quarterly interest payments on the specified payment date, compliance with all covenants in the Debenture Trust Deed, quarterly reporting to the debenture trustee, and exchange disclosures if listed.
The total process — from mandate to first disbursement — takes 45-90 days for a well-prepared issuer with a complete credit package. Issuers who arrive with incomplete information, pending security creation, or unresolved governance issues take significantly longer.
Eone Capital structures and places NCDs for established businesses with requirements of ₹30 crore and above.
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