What is Market Linked Debentures (MLDs)?

Market Linked Debentures are non-Market Linked Debentures (MLDs) debentures wherein the returns are not fixed however they are linked to the market. The returns are determined on the performance of the underlying index. The underlying index could be equity benchmark, government yield, gold index etc.

The advantage is that you are getting the exposure and upside in other markets such as equity (NSE Nifty) or G-sec, without taking as much of a risk as in investing directly into that asset.

Who issues these Bonds?

MLDs are issued by corporate with a minimum net worth of Rs. 100 crore. Each issuer is free to choose the underlying index or security to which the payoff for investor is linked.

Types of Market Linked Debentures

   1. Principal protected

    2. Non-principal protected

  • Market Linked Debentures are generally issued for a tenure ranging from 13 months to 60 months. Market Linked Debentures (MLDs) are debt instruments wherein the investors are generally sophisticated investors as this product is complex and has a high investment value.
  • MLDs come with a Capital Protection feature wherein here it is guaranteed that you will get back at least the principal amount on maturity, even if the movement in the other market is severely adverse i.e., your downside is protected because in the worst case, you will get zero return but will get your investment amount back. On the other hand, if the movement in the other market is favourable, you will get commensurate returns.
  • The ticket size of MLDs generally are Rs. 25 lakh or more. MLDS unlike binds do not pay regular fixed income. It pays the income only on maturity. It provides investors falling in the HNI category to invest in customised product.
  • Bonds and debentures - Investors are found looking for bonds and debentures. It is a good idea to have a mix asset in your portfolio to minimize risks and increase returns.
  • A percentage of investment in bonds and debentures can be a good choice for risk-averse individuals. Generally, a widely traded asset is chosen as the underlying asset so that it is not easy to manipulate
  • NCD investment – your decision related to NCD investment can prove fruitful incase you choose the issuer having good credit ratings. The level of risk is high in unsecured Non-Convertible Debentures (NCDs).
  • As an individual it is better to seek Expert Advice at BondsIndia prior to NCD investment and investment in other securities.

Key Features

  • The minimum amount of investing in MLD is Rs. 25 Lakhs.
  • They are generally issued with a tenure of one to five years.
  • They are regulated by SEBI (The Securities and Exchange Board of India).
  • Unlike a bond that pays a fixed interest either monthly, quarterly, half yearly or annually, MLDs do not pay any regular income; the payment is made only at maturity.
  • MLDs may be listed/unlisted or secured/unsecured. They are liquid instruments which are bought back by the issuers at times.
  • MLDs are highly customised as they cater to a sophisticated investor base.
  • MLDs are rated by independent Credit Rating Agencies. The participation rate can be higher to entice investors, if the MLD come with a lower rating.

Why Invest in Market Linked Debentures (MLDs)?

The Market Linked Debentures has its own importance and preferred by investors willing to take risks for higher return on investment. Debentures are chosen for a higher fixed or floating interest rate in short time.


Advantages of Investing in Market Linked Debentures (MLDs) Bonds


Advantages of Investing in Market Linked Debentures (MLDs) Bonds

Priority on Payments

Unlike bonds, debenture has some considerable advantages. Debenture holders get priority over bondholders when it is about capital and interest repayment.

Yield on Investment

Investing in Market Linked Debentures are made by the investors looking for a higher fixed or floating interest rate in short tenure.

Ease of Investment

Investment in Debenture has been made easy for investors. Investors today can make comparison for a better decision. BondsIndia allows you the facility to make comparison online for the potential investment in bonds.

Who Should Invest in Market Linked Debentures (MLDs)?

Market Linked Debentures (MLDs) are a good investment option for the common investors too. MLDs are preferred by the business families or office or HNIs looking for a good post-tax return.

BondsIndia is a highly sought online platform for bonds and other securities. You can browse through the different product categories for the hassle-free potential trade in bonds.

Investment in non convertible debentures can be a good choice for investors interested in receiving periodic interest on the investment made.

If you are not yet a member and would like to explore more about bonds,

Frequently Asked Questions

It is the non-convertible debentures. It is an investment tool. The returns in Market Linked Debentures are not fixed.

Market Linked Debentures are majorly classified into two types – principal protected and non-principal protected.

The decision to invest in Market Linked Debentures solely lies with you. It is better to explore online the relevant information for a better decision.

Investors choose Market Linked Debentures for higher yield on investment.

The ticket size for investment in Market Linked Debentures is Rs. 25 lakh or more.

Yes, the yield in Market Linked Debentures is more than bank FDs.

You need to create your account and complete the KYC online to buy bonds through BondsIndia.

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