NCD & Structured Debt: A Modern Way to Raise Capital Through Fixed Income Instruments
NCD and Structured Debt products have become a popular funding route in India’s evolving credit market. Businesses today require flexible and efficient ways to raise money beyond traditional bank loans. That is where instruments like Non-Convertible Debentures (NCDs) and structured debt securities come into focus. These are fixed-income instruments that allow companies to borrow funds from investors through regulated frameworks. NCDs are debt instruments issued by corporates. They provide investors with regular interest income. They are called “non-convertible” because they cannot be converted into equity shares. This makes them a stable choice for investors seeking predictable returns.
For example, a real estate developer may need ₹200 crore for project completion. Instead of taking a high-cost loan, the developer may issue privately placed secured NCDs. Investors receive interest payouts. The repayment is backed by project receivables and asset security. This creates a structured repayment framework. Similarly, mid-sized companies with ₹5 crore+ funding needs may use structured instruments to fund working capital or refinancing requirements.
Private Placement for NBFCs and Corporates
Private placement is a structured way to raise capital from a select group of institutional or qualified investors instead of public issuance. For NBFCs and corporates, it is commonly used for faster fund raising, refinancing, and balance sheet planning.
The structure is typically customized based on tenure, coupon, security package, and repayment visibility. It gives flexibility to align borrowing terms with business cash flows and strategic funding needs.
- Suitable for medium to large ticket fund raising requirements.
- Can be structured as secured or unsecured, depending on profile.
- Useful for growth capital, refinance, and liability management.
- Faster execution compared to broad public fund raising routes.
- Terms can be negotiated based on risk profile and investor appetite.
With the right structuring and documentation discipline, private placement can improve funding certainty while preserving operational flexibility.
AIF Backed Debt and Category II Debt Funds: Structured Credit Through Professional Management
Alternative Investment funds have become a significant market for financial institutions that have participated in this area. In India, layered Alternative Investment Funds (AIFs) are classified as AIFs under Category II by the SEBI (Alternative Investment Funds) Regulations of 2012. The use and operation of these various types of Investment Funds provide individual and institutional investors with an opportunity to invest through a variety of investment products, including Corporate Bonds, Non-Convertible Debentures, Commercial Paper, as well as other Standardized Fixed Income products.
Usually, the structure of a Debt Fund AIF is a trust. An entity known as a "Sponsor" sets up an investment trust fund. An entity known as a "trustee" holds the assets in the Trust for investors in accordance with the Trust's guidelines. A professional investment manager is responsible for the investment selection and allocation processes according to the Fund's objectives and performance measures. Investors in Debt Fund AIFs typically consist of larger institutional and high-net-worth investors; therefore, the threshold for participating in Debt Fund AIFs is relatively high.
AIF-Backed Structured Credit in Practice
AIF-backed debt is often used in structured lending solutions. For example, a company may issue secured NCDs subscribed by a Category II debt fund. The repayment may be supported by escrow cash flows, mortgage security, and receivable assignments. This creates a structured credit product backed by institutional capital. Investors benefit through stable income and diversification beyond traditional fixed deposits.
Why This Funding Channel Is Growing
Fund managers assess credit quality, interest rate risk, and liquidity risk before allocating capital. AIF-backed structured debt has become a key funding channel for real estate developers, mid-market corporates, and infrastructure borrowers. It bridges the gap between bank lending and capital markets and offers tailored financing with risk-managed structures.
Structured Instruments and Credit Enhancements: Advanced Debt Solutions for Modern Borrowers
Structured debt instruments are advanced financing solutions designed to meet specific borrower and investor requirements. These instruments go beyond plain vanilla bonds. They include features like layered security, escrow repayment, cash flow waterfalls, and collateral backing. Structured instruments are commonly used in real estate finance, infrastructure funding, and corporate refinancing.
Structured debt can take many forms. It may include secured NCDs with mortgage backing. It may involve pass-through structures linked to receivables. It may also include credit-enhanced instruments supported by guarantees or reserve accounts. These structures help reduce risk and improve investor protection.
- A developer may raise funds through structured NCDs backed by project receivables, where buyer payments are routed via escrow and repayment is deducted first.
- An infrastructure company can issue structured debt with a defined security cover over toll collections for stronger credit comfort.
- Investors get better cash-flow visibility and potential yield enhancement versus traditional fixed income options.
However, structured debt also requires strong compliance. Issuers must provide detailed disclosures. Credit ratings are often mandatory. Trustees monitor security enforcement. Structured products are typically offered through private placement and subscribed to by institutional investors, AIFs, and family offices.
Structured debt is an essential part of India’s growing credit ecosystem. It provides borrowers with flexible capital and gives investors access to stable income strategies. With rising demand for customized funding, structured instruments are becoming a high-growth category in corporate debt markets.
Private Placement in Structured NCDs
Why It Has Become a Preferred Corporate Funding Route
Private placement debt instruments are also attractive because they allow customized structuring. A company can design repayment linked to project cash flows. It can include escrow mechanisms for safety. In addition, they can provide credit enhancement through collateral or guarantees. As a result, structured NCDs are often the investment of choice for those who are primarily focused on credit risk.
In addition, through SEBI, all public disclosures are required to be made by the issuer, ensuring transparency and investor protection, and a credit rating is also required from an issuer for SEBI to approve new issuances. Private placements also support the growth of India’s corporate bond market. They provide an alternative channel of funding beyond traditional lending. This is why private placement NCD issuance has become a high-ranking keyword segment in corporate finance and structured debt advisory.
Private Placement NCD: A Preferred Route for Corporate Debt Raising in India
One of the most common ways for corporations to raise funds in India when they borrow is through the private placement of non-convertible debentures (NCDs). Corporations have the ability to arrange for debt capital from a limited choice of investors, often being institutional investors, high net worth individuals, family offices, or alternative investment funds.
In contrast to public issues of debentures, private placements can generally be executed more quickly and offer greater flexibility. They involve fewer marketing requirements and quicker execution timelines.
In a private placement structure, the company issues secured or unsecured NCDs under agreed terms. These terms include maturity, coupon payout, security coverage, and repayment schedule. The investors subscribe to these debentures based on credit quality and yield expectations. Private placement NCDs are common in sectors such as real estate, infrastructure, manufacturing, and NBFC funding.