Write short notes on the following: Convertible debt instruments.

Section 71 (1) of Companies Act, 2013 and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, regulates the issue of convertible debt instruments. Issue of convertible debt instrument shall be approved by special resolution passed in general meeting. Convertible securities offer a unique combination of debt and equity to investors. Holder of such a security can convert the security into equity and benefit if the issuer of the securities performs well. However, if the issuer is not performing as per expectations, the security holder has the option of redeeming the security at a pre-determined maturity date. Issuing convertible securities help a corporation secure equity financing in a delayed manner, as securities will be converted to equity at a future date. This process delays dilution of the common stock and earnings per share. Companies can sell convertible securities at a lower coupon rate than standard debt issuances because of the conversion option. Convertible security holders only receive interest, resulting in more operating income to the common stockholders until the securities are converted to equity.