Perpetual debentures occupy an interesting space in the structuring toolkit. By keeping the maturity, the coupon servicing, and the principal repayment discretionary in the hands of the borrower, what is on paper a debenture acquires the substance of an equity instrument.
That structural choice has consequences across the frameworks that apply to it. Ind AS 32 treats the instrument as equity, on the basis that there is no unconditional obligation to deliver cash. The Companies Act continues to treat it as a debenture, and therefore it does not feature in the Section 2(57) definition of net worth. The coupon, when actually paid, is deductible under Section 36(1)(iii). FEMA does not recognise perpetual debentures as an equity instrument. Under the IBC, the holder is not a financial creditor.
The same instrument, therefore, is read differently by Ind AS, the Companies Act, the income-tax law, FEMA, and the IBC. The structuring question is not whether a perpetual debenture can be issued, but which characterisation is being relied on for the commercial outcome, and whether the other frameworks align with that reliance.
The carousel sets out the commercial scenarios where the instrument can be effective, the regulatory and tax matrix across the applicable frameworks, and the commercial and regulatory watch-outs that need to be considered.