DEBENTURES, WARRANTS & VENTURE CAPITAL JONLEN J.R.DESA M.COM-1 R.M/COM-11-06
Meaning of Convertible Debentures Features of Convertible Debentures Valuation of Convertible Debentures Meaning of Warrants Features of Warrants Valuation of Warrants Capital Venture- Meaning & Features Business Plan Elements
A Convertible Debenture is a debenture that can be changed into a specified number of equity shares at the option of the owner. Definition Debenture which can be converted into stock at the option of the holder at a specified date in the future. Because the buyer has the ability to convert the debenture into stock under certain circumstances, the seller is able to borrow at a lower cost than if the convertibility feature was not present.
1.CONVERSION RATIO-It is the no.of shares that an investor can receive when he exchanges his convertible debenture.Conversion Ratio= Par value of Convertible Deb Conversion Price 2.CONVERSION PRICE- It is the price paid for the ordinary share at the time of conversion.
Conversion ValueConversion Value=Conversion Ratio x Sh price Valuation of Non-Convertible Debentures It is also known as Straight Debenture. Value of NCD=Sum of the present value of future interest payments & principal redemption at the required rate of return.
A Warrant is a derivative security thatgives the holder the right to purchasesecurities (usually equity) from the issuerat a specific price within a certain timeframe.Warrants are often included in a newdebt issue.
1) Exercise Price2) Exercise Ratio3) Expiration Date4) Detachability5) Right
1) Theoretical Value of a warrant can be found out if we know the ordinary share’s market price & warrant’s exercise price. Theoretical Value= (Sh Price- Exercise Price)* Exercise Ratio.2) Premium Value It is the difference between the market value & the theoretical value of the warrant. Premium=Warrant’s Market Value- Warrants Theoretical Value Warrant’s Theoretical Value
VC is an imp innovation of the 20th Century. Synonym of “Risk Capital”-Long term risk Capt. It is considered as “ the early stage financing of new & young enterprises to grow rapidly. VC plays an imp role to finance SSE’s & high technology & risky capital. VCs operate in Pub & Pvt Sectors. VC supports risky projects or ventures.
Equity ParticipationLong Term InvestmentParticipation in ManagementHigh Risk Involved
Executive Summary Background of the Venture The Product or the Service Market Analysis Marketing The management team Financial Projections
WEBSITES1. www.google.com2. www.investorwords.com3. www.investopidia.com4. En Wikipedia REFRENCES Financial Management-I.M.Pandey Financial Management-M.Y.Khan, P.K. Jain Business Finance-N.G. KALE