D Ltd. issues preference shares to G Ltd. The HOLDER has an option to convert these preference shares into equity within 10 years; if conversion is not exercised, they are redeemed in cash at the end of year 10. Under Ind AS 32, the redemption component of the preference share is:

Ind AS 32.19 — if the issuer does not have an UNCONDITIONAL right to avoid delivering cash, the obligation is a financial liability. The conversion right rests with the holder; the issuer can be forced to pay cash if conversion is not chosen. The redemption component is therefore a liability. The conversion option held by the holder is a separate component (the equity feature of a compound), analysed separately.