What are Corporate Bonds?

Corporate bonds are debt instruments issued by companies to raise funds for business needs such as expansion, new projects, or refinancing existing debt. When you invest in a corporate bond, you are essentially lending money to the company in exchange for regular interest payments (coupon) and repayment of the principal at maturity.

These bonds provide an alternative to bank loans and allow companies to diversify their funding sources without diluting ownership. They are preferred by investors seeking predictable returns, though they carry higher risk than government bonds because repayment depends on the company’s financial health.

Key Features of Corporate Bonds

Fixed Income:

Investors receive regular interest payments (coupon) at predetermined intervals.

Credit Rating:

Each bond carries a rating that reflects the issuer’s creditworthiness and risk level.

No Ownership Rights:

Unlike shares, bonds do not provide voting rights or equity in the company.

Higher Yield than Government Bonds:

Typically offer better returns to compensate for higher risk.

Tradable in Secondary Market:

Many corporate bonds can be bought or sold before maturity.

Variety of Structures:

Options include secured, unsecured, convertible, and non-convertible bonds.

Risk Factors:

Subject to credit risk, interest rate risk, and liquidity/market risk.

Types of Corporate Bonds

Secured Bonds:

Backed by company assets as collateral.

Unsecured Bonds (Debentures):

No collateral; based on creditworthiness.

Convertible Bonds:

Can be converted into issuer company‘s equity shares.

Non-Convertible Bonds:

Cannot be converted; usually offer higher interest.

Fixed-Rate Bonds:

Pay a fixed interest throughout the tenure.

Floating-Rate Bonds:

Interest varies with a benchmark rate.

Perpetual Bonds:

No maturity date and pay interest until they’re called back.

Tax-Free Bonds:

Interest earned from them is exempt from income tax.

Callable Bonds:

Issuer can redeem before maturity.

Puttable Bonds:

Investor have right to redeem (sell back) the bond to the issuer before its maturity date, at a predetermined price.

How to buy Corporate Bonds in India

Through Stock Exchanges:

Listed bonds can be purchased via NSE/BSE platforms.

Online Bond Platforms:

Use SEBI-registered platforms offering corporate bonds.

BondPro by YES Securities:

A dedicated bond investment platform within the OMNI terminal, powered by GoldenPi, enabling easy online purchase of corporate bonds and government securities.

Banks and NBFCs:

Some institutions distribute bonds directly to investors.

Debt Mutual Funds:

Indirect exposure through Mutual funds investing in corporate bonds.

Private Placements:

For high-net-worth investors via Lead arrangers or brokers.

Why invest in Corporate Bonds?

Corporate bonds offer higher returns compared to government securities, making them attractive for investors seeking better yields. They provide regular income through fixed interest payments and help diversify portfolios by balancing equity volatility with fixed-income stability. Additionally, corporate bonds come in various risk-return profiles, giving flexibility to investors.

Who should consider investing in Corporate Bonds?

• Investors Seeking Higher Return than traditional fixed income investments.
• Those Looking for Regular Income through fixed interest payments.
• Risk-Tolerant Investors comfortable with credit and interest rate risk.
• Portfolio Diversifiers who want to balance equity exposure with fixed income.
• Long-Term Planners seeking predictable returns for wealth creation