XYZ Ltd., an unlisted company, issued partly convertible debentures to the tune of ₹ 500 crore out of which convertible (into equity shares) portion is ₹ 300 crore. Pursuant to Rule 18(7) of the Companies (Share Capital

The following points to be checked and ensured under rule 18(7) of the Companies (Share Capital and Debenture) Rules, 2014, for compliance for creation of Debenture Redemption Reserve (DRR) by XYZ Ltd. The DRR is created out of the profits of the company available for payment of dividend. The amount of DRR shall be at least 25% of the value of outstanding debentures. Whether or not, on or before 30th April in each year, XYZ Limited has invested or deposited, as the case may be, a sum which shall not be less than 15% of the amount of its debentures maturing during the year ending on 31st March of the next year, in anyone or more of the method as provided in Clause (c) of Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014. That the amount of DRR has not been utilised except for the purpose of redemption of debentures. The 25% mentioned in point '2', applies only to the non-convertible portion of the Debenture issue which is ₹ 200 crore which comes to ₹ 50 crores. Since the requirement is creation of minimum 25% of the outstanding debentures, the company can create more DRR, the creation of ₹ 125 crores of DRR is in compliance with the requirements.