Home » Guide To Indian Corporate Bonds: Know More

Guide To Indian Corporate Bonds: Know More

by Andrew Jonathan

Corporate Bonds are debt securities issued by corporations for both short-term and long-term fundraising. It is offered at a premium, given against subsequent refunding or used to change the outstanding capital. They are generally without any security interest, with no lien or charge in the event of incurrence of execution.

What are Corporate Bonds?

Corporate bonds are debt securities issued by public and private companies to raise funds for their business operations. These bonds are typically issued in denominations of $1,000 and are traded on the secondary market. Interest on corporate bonds is paid semi-annually, and the principal amount is repaid at maturity.

Corporate bonds typically have a higher credit rating than other types of bonds, such as government bonds, because they are considered to be a less risky investment. However, corporate bond prices can be more volatile than other types of bonds due to changes in the financial health of the issuing company.

Investors who purchase corporate bonds should be aware of the credit risk involved and research the financial condition of the issuing company before investing.

Types of Bonds

Corporate bonds are classified as either secured or unsecured. Unsecured corporate bonds are also called debentures. Secured corporate bonds are backed by collateral, which may be in the form of property, equipment, or another asset. The following is a more detailed look at the different types of corporate bonds:

1. Senior Bonds: These are the safest type of bond because they have first claim on a company’s assets and income. If a company goes bankrupt, senior bondholders will be paid before any other creditors.

2. Subordinate Bonds: These are lower in priority than senior bonds and therefore carry more risk. In the event of bankruptcy, subordinate bondholders may not receive all of their money back.

3. Convertible Bonds: These bonds can be converted into shares of stock at a later date, giving the holder an ownership stake in the company. Convertible bonds typically have a higher interest rate than non-convertible bonds because of this added feature.

4. Callable Bonds: These bonds can be redeemed by the issuer before their maturity date. Callable bonds typically have a higher interest rate than non-callable bonds to compensate investors for this added risk.

Stocks vs. Bonds

When it comes to investment, we all want to earn the highest return possible. However, return is not the only factor that determines where we should invest our money. We must also consider risk.

When we talk about risk, we are referring to the probability that we will lose some or all of our investment. When it comes to bonds, the risk is relatively low. This is because bonds are issued by governments and companies which have a good track record of making timely interest and principal payments.

However, even though the risk is low, there is still a chance that you could lose money if the issuer defaults on their payments. This is why it is important to research the issuer before investing in any bond.

On the other hand, stocks are a lot more risky than bonds. This is because stock prices can go up or down drastically and you could lose a lot of money if you invest in a company that suddenly goes bankrupt.

So, which one should you invest in? It depends on your goals and risk tolerance. If you are looking for stability and income, then bonds may be a good choice for you. However, if you are willing to take on more risk in order to potentially earn a higher return, then stocks may be a better option.

How to Buy and Sell in India

When it comes to buying and selling in India, there are a few things you should keep in mind. For starters, the Indian corporate bond market is still relatively new, which means that there is not a lot of liquidity. This means that it can be difficult to find buyers for your bonds, or to sell bonds you have bought.

Another thing to keep in mind is that the Indian corporate bond market is still developing, which means that the rules and regulations are constantly changing. This can make it difficult to understand how the market works, and what your rights and obligations are as a bondholder.

Finally, it is important to remember that interest rates in India are high, which means that you will need to factor this into your decision-making when buying or selling bonds.

With all of this in mind, here are a few tips on how to buy and sell in the Indian corporate bond market:

1. Do your research: As we mentioned above, the Indian corporate bond market is still relatively new and underdeveloped. This means that it is important to do your research before buying or selling any bonds. Make sure you understand how the market works, and what the current rules and regulations are.

2. Work with a broker: Given the lack of liquidity in the Indian corporate bond market, it is often helpful to work with a broker who can help you find buyers or sellers for your bonds. A good broker will also have a good understanding of the

Role of Government in the Bond Market

The role of the government in the bond market is to provide a regulatory and policy framework within which the market can operate. The government also has a role in promoting the development of the bond market, through initiatives such as the launch of new products and improvements to market infrastructure.

The government’s regulatory role is designed to ensure that the bond market functions smoothly and efficiently, while protecting investors’ interests. The Securities and Exchange Board of India (SEBI) is the primary regulator of the bond market. SEBI’s rules and regulations cover all aspects of bond issuance and trading, including eligibility criteria for issuers, disclosure requirements, pricing guidelines and trading procedures.

The government also plays a key role in developing the infrastructure of the bond market. For example, SEBI has introduced an electronic platform for trading corporate bonds, known as ‘E-bond’, which has helped to increase transparency and efficiency in the market. The Reserve Bank of India (RBI) also provides important infrastructure for the bond market, through its clearing house facilities and its role as agent for Government securities transactions.

Duration of the Bond

  • invest for a minimum of 3 years.
  • The tenure of the bonds ranges from 3 years to 10 years.
  • 3 years is the minimum tenure for which an investor can
  • invest in corporate bonds in India. The maximum tenure for
  • which an investor can invest is 10 years.

Where to Find Information on Indian Corporate Bonds

When it comes to corporate bonds in India, there is no one-size-fits-all answer as to where you can find information. However, a few general tips can help point you in the right direction.

One starting point is the website of the Securities and Exchange Board of India (SEBI), which regulates the country’s securities markets. SEBI’s website has a dedicated section on corporate bonds, with information on various aspects of these instruments.

Another useful source of information is the Reserve Bank of India (RBI), which is the country’s central bank. The RBI’s website has a section on government securities, including corporate bonds. This section provides data on corporate bond issuances and secondary market trading volumes, among other things.

Other websites that might be useful include those of rating agencies such as Crisil and CARE Ratings, which provide ratings for corporate bonds. These websites also have extensive databases that can be searched for specific bond issues.

Last but not least, financial newspapers such as The Economic Times and Business Standard often have articles on corporate bonds. These can be a good source of both general information and specific details on individual bond issues.

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