Corporate Bonds
Debt securities issued by corporations to raise capital for business expansion, acquisitions, or refinancing existing debt.
Key Features
- Higher returns than government securities with moderate risk
- Regular interest payments (monthly, quarterly, or annually)
- Credit ratings from agencies like CRISIL, ICRA, and CARE
- Diversification across sectors (banking, NBFCs, infrastructure, etc.)
Who Should Invest?
Conservative Investors
Looking for higher returns than FDs but with lower risk than equities
Portfolio Diversifiers
Want to balance equity exposure with fixed income assets
Income Seekers
Need regular interest payments for living expenses
Risk-Averse Investors
Prefer capital protection with predictable returns
Government Securities
Debt instruments issued by the Government state governments to finance fiscal deficits and infrastructure projects.
Types of G-Secs
- Treasury Bills: Short-term (91-day, 182-day, 364-day) zero-coupon instruments
- Government Bonds: Long-term securities with fixed or floating rates
- State Development Loans: Issued by state governments
- Inflation-Indexed Bonds: Principal adjusted for inflation
Key Benefits
- Highest safety as they carry sovereign guarantee
- Highly liquid with active secondary market
- Tax benefits for certain bonds (e.g., tax-free bonds)
- No TDS on interest income
Note: While government securities have negligible default risk, they are subject to interest rate risk. Bond prices fall when interest rates rise, which matters if you need to sell before maturity.
Municipal Bonds
Debt securities issued by municipal corporations or local governments to fund infrastructure projects like roads, schools, and utilities.
Why Invest in Municipal Bonds?
Tax-Free Interest
Interest income is exempt from income tax under Section 10(15) of IT Act, making effective returns higher for taxpayers.
Infrastructure Development
Your investment directly funds essential public infrastructure projects in cities and towns.
Revenue Backing
Many muni bonds are backed by specific revenue streams like tolls, taxes, or utility payments.
Portfolio Diversification
Adds a different risk-return profile to your fixed income portfolio compared to corporate bonds.
Recent Municipal Bond Issues
| Issuer | Coupon | Tenure | Rating | Min. Invest |
|---|---|---|---|---|
| Pune Municipal Corp | 8.50% | 5 Years | AA (CRISIL) | ₹10,000 |
| Ahmedabad Municipal Corp | 8.10% | 7 Years | AA+ (ICRA) | ₹10,000 |
| Greater Hyderabad Municipal Corp | 8.75% | 10 Years | AA (CARE) | ₹10,000 |
Tax-Free Bonds
Long-term bonds issued by government-owned entities where the interest income is completely exempt from income tax.
Tax-Free Bond Advantages
For 30% Tax Bracket Investors
*Post-tax returns assuming 30% tax bracket + 4% cess
Key Benefits
- 100% tax-free interest income under Section 10(15)
- No TDS deduction on interest payments
- Listed on exchanges with decent liquidity
- Backed by government-owned entities
Popular Tax-Free Bond Issuers
Railway Finance
7.35% | 15 Years | AAA Rated
NTPC Limited
7.15% | 10 Years | AAA Rated
HUDCO
7.25% | 20 Years | AAA Rated
Green Bonds
Fixed income instruments where proceeds are exclusively applied to finance or refinance eligible green projects with environmental benefits.
Green Bond Framework
Eligible Project Categories
- Renewable energy projects
- Energy efficiency improvements
- Clean transportation
- Sustainable water management
- Climate change adaptation
Why Invest in Green Bonds?
- Align investments with environmental values
- Attract environmentally conscious investors
- Potential for "greenium" (lower yields due to high demand)
- Diversification into sustainable assets
Green Bond Certification
Climate Bonds Certification
Our green bonds are certified by the Climate Bonds Initiative, ensuring alignment with international best practices.
Secured NCDs
Non-Convertible Debentures that are secured by a charge on the issuer's assets, providing additional protection to investors.
Security Features
Asset Backing
Secured by tangible assets like property, plant & equipment
Seniority
Higher claim priority than unsecured creditors
Covenants
Financial covenants to protect investor interests
Comparing Secured vs Unsecured NCDs
| Feature | Secured NCD | Unsecured NCD |
|---|---|---|
| Collateral | Backed by specific assets | No collateral |
| Risk Level | Lower (asset coverage) | Higher |
| Interest Rate | 0.5-1.5% lower than unsecured | Higher to compensate risk |
| Recovery in Default | First claim on specified assets | After secured creditors |
Perpetual Bonds
Hybrid instruments with no maturity date, offering regular coupon payments indefinitely while allowing issuer call options.
Understanding Perpetual Bonds
Key Characteristics
- No maturity date (theoretically perpetual)
- Issuer call option after specified period
- Coupon payments may be discretionary
- Treated as equity on issuer's balance sheet
Investor Considerations
- Higher yields compensate for perpetual nature
- Call option likely to be exercised in falling rate environment
- Secondary market liquidity can be limited
- Best suited for sophisticated investors
Recent Perpetual Bond Issues
HDFC Bank Perpetual Bond
Issued: Jan 2023 | Call Option: After 10 years
Coupon Rate
10.25% p.a.
Rating
AA+ (CRISIL)
Min. Invest
₹10 Lakhs
ICICI Bank Perpetual Bond
Issued: Mar 2023 | Call Option: After 5 years
Coupon Rate
11.00% p.a.
Rating
AA (ICRA)
Min. Invest
₹10 Lakhs