Glossary
CCD (Compulsorily Convertible Debenture)
A debt instrument that compulsorily converts to equity at a future trigger — a legally-recognised alternative to SAFE for Indian startups.
By Amit Tyagi, Fitoor Capital · AletheiaAI Glossary
Definition
CCD (Compulsorily Convertible Debenture) is a debt instrument under Indian company law that compulsorily converts to equity at a defined trigger. Unlike a bank loan, CCDs don't expect cash repayment — they convert to shares at the next priced round, IPO, or hard maturity (typically 18–24 months).
CCDs carry nominal interest (usually 0.01%–1%) to satisfy the debt classification under the Companies Act. The interest accrues but isn't usually paid in cash — it gets added to the principal at conversion.
Standard CCD economics mirror SAFE: valuation cap, discount rate (15–25%), and conversion at the trigger.
India Context
CCDs are the legal default for Indian convertible rounds at sub-₹2Cr scale or when iSAFE isn't preferred by the investor. The instrument is well-understood by Indian counsel, RBI compliance is straightforward, and conversion mechanics are predictable. CCDs typically carry 0.01% interest, 20% discount, and 18-month maturity in current Indian market norms.
Maturity matters: if no priced round happens before CCD maturity, the CCD converts at the maturity-date valuation (typically a 15–30% discount to the issue price) — or renegotiated terms via board approval.
Example
Pre-seed CCD: ₹50L at 0.01% interest, 20% discount, ₹15Cr cap, 18-month maturity. Series Seed closes 12 months later at ₹22Cr pre-money. The CCD converts at the ₹15Cr cap (lower than 20% discount on ₹22Cr = ₹17.6Cr), giving the investor ~3.4% of the company.
Frequently Asked Questions
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