How optional or compulsory convertible debentures work?

Convertible debentures are debt instruments that can be converted into a company's equity shares at a predetermined price after a specified period. They are typically issued by companies to raise capital while offering investors the potential for capital appreciation if the company's stock performs well. While compulsory convertible debentures require conversion into equity at maturity, optional convertible debentures allow investors to choose whether to convert or redeem them for cash, providing more flexibility. This feature appeals to investors seeking both fixed income and potential equity upside.