Security cover, or asset cover, is the value of the assets charged to secured NCD holders divided by the amount owed to them. A cover of 1.10 times means ₹110 of assets for every ₹100 owed.
Listed secured NCDs must keep at least 100% security cover, or more if the offer document promises it. Issuers report the cover every quarter, with a certificate from their statutory auditor, and the debenture trustee monitors it.
For NBFCs the charged assets are usually loans receivable, whose value depends on borrowers paying. A cover just at the minimum leaves little room if those loans go bad.
Related
Related terms: Secured NCD · Debenture trustee · Debenture redemption reserve (DRR)
Before investing, look up the issuer: all its outstanding bonds, rating history and disclosure documents.
This page is for information only. It is not investment advice, a credit rating or a recommendation to buy, sell or hold any security. Facts are taken from the issuer's own documents and the sources linked on this page; check them with the source before investing.
