Definition
Market Linked Debenture (MLD)
A Market Linked Debenture is a debt instrument whose return is tied to the performance of a market index or other underlying, rather than a fixed coupon.
An MLD pays a return linked to an underlying benchmark — such as an equity index or a government-security level — instead of a regular fixed coupon. The payoff is defined by a formula at issuance, sometimes with principal protection conditions.
MLDs are typically issued in large denominations and aimed at sophisticated and high-net-worth investors. The tax treatment of MLDs was rationalised so that gains are now taxed as short-term/applicable income rather than enjoying earlier concessional treatment.
MLDs carry issuer credit risk and complexity; the actual return depends on how the linked market performs and the specific payoff structure, so the term sheet must be read carefully.
Related terms
- Bond Investing PlatformsBond investing platforms are SEBI-regulated online avenues, including Online Bond Platform Providers, that let retail investors buy listed corporate and government bonds in small lots.
- NCD Public IssueA Non-Convertible Debenture public issue is a company's offer of debt securities to the public that pay fixed interest and return principal at maturity, without converting into shares.
- Alternative Investment Fund (AIF)An Alternative Investment Fund is a SEBI-regulated privately pooled vehicle for sophisticated investors, classified into Category I, II and III with high minimum investment thresholds.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.