what amount of DRR is created when we are redeeming debentures out of profits?

50 % DRR is created

Section 117C of the Companies Act, 1956, was introduced in 2000 as a measure to protect the interest of debenture-holders. It requires every company which has issued debentures to create a Debenture Redemption Reserve (DRR).

As per this section, a company shall credit adequate amounts to DRR from its profits every year until such debentures are redeemed.

The amounts credited to the DRR shall not be utilized by the company except for the
redemption of debentures.

Recognizing the insertion of Section 117C, the Securities and Exchange Board of India
(SEBI), which had earlier prescribed separate requirement for creation of DRR by listed companies, has amended its earlier guidelines.

Now, the SEBI guidelines also require listed companies to create DRR as per Section 117C. Thus, both listed and unlisted companies are subject to the same requirements of Section 117C for creation of DRR.

What follows is an FAQ on DRR:

Q: As per Section 117C, a company should
credit adequate amounts to DRR. What
does this imply?

A: To clarify the applicability of Section
117C, the Department of Company Affairs
( now Ministry of Corporate Affairs)
issued General Circular No. 9/2002 dated
April 18, 2002. The Circular outlines the
the Department of Company Affairs
( now Ministry of Corporate Affairs)
issued General Circular No. 9/2002 dated
April 18, 2002. The Circular outlines the
following limits for adequacy of DRR in
case of certain classes of companies:
a) All India financial institutions regulated
by RBI and banking companies —
public issue, nil; private placement, nil.
b) NBFCs and other financial institutions
— public issue, 50 per cent; private
placement, nil.
c) Manufacturing and infrastructure
companies — public issue, 50 per cent;
private placement, 25 per cent.
For other companies, there is no
specific guidance in the Circular.

hope its clear now