Convertible debentures are a type of debt instrument issued by companies that can be converted into a predetermined number of the company's equity shares at the option of the holder. This means that investors can choose to exchange their debentures for shares, potentially benefiting from any increase in the company's stock price. These debentures typically offer lower interest rates compared to regular bonds because of the added value of the conversion feature. Investors are attracted to convertible debentures as they provide a fixed income while also offering the opportunity for capital appreciation if the company's performance improves.