How to Buy Corporate Bonds in India: A Comprehensive Guide

Investing in corporate bonds has become a popular option for those looking to diversify their portfolios and secure steady returns. With the evolving financial landscape in India, understanding how to buy corporate bonds can provide a significant advantage to both seasoned and novice investors. This article will guide you through the process, from understanding what corporate bonds are to step-by-step instructions on how to invest in them.

What are Corporate Bonds?

Corporate bonds are debt securities issued by companies to raise capital. When you purchase a corporate bond, you are essentially lending money to the issuing company in exchange for periodic interest payments, known as coupon payments, and the return of the bond’s face value upon maturity. Corporate bonds are an attractive investment option as they often offer higher interest rates compared to government bonds and savings accounts, reflecting the higher risk associated with them.

What are the Benefits of Investing in Corporate Bonds?

Investing in corporate bonds offers several benefits:

1. Higher Returns: Corporate bonds typically offer higher yields compared to government bonds and fixed deposits.
2. Regular Income: Investors receive regular interest payments, providing a steady income stream.
3. Diversification: Adding corporate bonds to an investment portfolio helps diversify risk.
4. Predictability: The fixed nature of coupon payments and maturity value makes corporate bonds predictable and less volatile compared to stocks.
5. Capital Preservation: For risk-averse investors, corporate bonds can be a safer option to preserve capital while earning returns.

Types of Corporate Bonds Available in India

In India, corporate bonds can be classified based on listing status and type of security:

Listed and Unlisted Bonds

• Listed Bonds: These bonds are traded on recognized stock exchanges such as the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE). They provide better liquidity and transparency.
• Unlisted Bonds: These bonds are not traded on stock exchanges. They might offer higher yields but come with higher liquidity risk.

Types of Security

• Secured Bonds: These bonds are backed by the issuer’s assets, providing an additional layer of security for investors.
• Unsecured Bonds: These bonds are not backed by collateral and carry a higher risk but might offer higher returns.

Steps to Invest in Corporate Bonds in India

Direct Investment via OBPP (Online Bond Platform Providers)

1. Research: Begin by researching various corporate bonds available for investment. Pay attention to credit ratings, yields, maturity periods, and issuer reputation.
2. Choose a Bond: Select a bond that aligns with your investment goals and risk tolerance.
3. Open an Account: Register with an online bond platform provider (OBPP) like Aspero, Wint Wealth, Grip Invest etc.
4. Complete KYC: Fulfill the Know Your Customer (KYC) requirements by submitting necessary documents.
5. Purchase Bonds: Use the platform to buy the selected bonds. Confirm the transaction details and complete the purchase.

Investing Through a Broker

1. Select a Broker: Choose a reputable broker who deals in corporate bonds.
2. Open a Trading Account: Complete the account opening process with the broker.
3. Research Bonds: Work with your broker to identify suitable corporate bonds.
4. Place an Order: Instruct your broker to purchase the bonds on your behalf.
5. Monitor Investment: Keep track of your investments and stay informed about any updates from the issuer.

Investing in Corporate Bonds on Aspero: Step-by-Step Guide

Aspero is a popular SEBI registered online bond platform for investing in corporate bonds in India. The platform offers premium fixed income securities such as corporate and government bonds for investment to retail investors, independent financial advisors and large wealth distributors with yields ranging up to 14%. Aspero offers a large variety of investment grade bonds to choose from, carefully curated by their in-house experts and helps investors invest in the bond of their choice in 5 simple stepsHere’s how you can invest through Aspero:

1. Sign Up: Visit invest.aspero.in or download the Aspero app from Google Play Store or App store. Complete OTP verification with your mobile number to finish signing up.
   how to buy corporate bonds in india on Aspero
2. Start your KYC verification: Submit required details to complete your KYC verification. Watch our detailed KYC verification guide here
3. Browse Bonds: Use Aspero’s user-friendly interface to browse available corporate bonds.
   

   How to buy corporate bonds in India: Aspero Explore Page

4. Select the Bonds you wish to invest in: You can look at details such as Coupon Rate, Yield To Maturity, Tenor, Credit Rating etc. Additionally you also get information about the issuer via Aspero’s listing videos and credit rating rationale document attached.
5. Fund Your Account: Transfer funds to your Aspero account.
6. Purchase Bonds: Select the bonds you wish to invest in and complete the purchase.
7. Monitor Portfolio: Use Aspero’s dashboard to monitor your investments and receive updates.

How to Buy Corporate Bonds In India: MAS Financial NCD

Here’s how to evaluate and purchase a bond on the Aspero platform

Case in point: MAS Financial NCD

Here’s how you can evaluate this bond for investment:

1. Credit Rating: Check the bond’s credit rating from mentioned in the fundamental details section. A higher rating indicates lower default risk. MAS Financial is rated A+ by CARE ratings indicating relatively lower default risk and higher safety.
2. Yield: Compare the bond’s yield with other similar bonds. Ensure the yield compensates adequately for the risk. You can see the Yield here ranges up to 10%, which is significantly higher than Bank FD rates and Savings account rates. However, you may choose to invest or explore other bonds depending upon the kind of returns you desire.
3. Maturity: Consider the bond’s maturity period. Longer maturities may offer higher yields but come with greater interest rate risk. This bond offers a remaining tenor of less than 12 months, which means you can expect your principal investment back with interest income and any capital appreciation within the 1 year horizon which implies lower risk, thereby making this an attractive investment option. However, it is important to note the changing tax liability on account of this. Learn more about bond taxation here 
4. Issuer’s Financial Health: Analyze MAS Financial’s financial statements and performance. Strong financial health indicates a lower risk of default. Here’s the latest financial update on MAS Financial: The company reported a robust financial performance, where the consolidated AUM of MAS Financial Services crossed ₹10,700 crore in Q4 2024 and reported Profit After Tax (PAT) of more than ₹250 crore in FY 2024. The company reported Cash & bank balances of ~ ₹8,423 Mn. as on 31st March 2024 and has sufficient liquidity to cover opex and debt liabilities for at least next 12 months.

Conclusion

Corporate bonds represent a promising avenue for fixed income investing, especially for retail investors seeking higher returns and regular income. With the advent of online platforms like Aspero, investing in corporate bonds has become more accessible and transparent. By understanding the types of corporate bonds, the steps to invest, and how to evaluate investment opportunities, you can make informed decisions and effectively diversify your investment portfolio. Corporate bonds are indeed poised to play a significant role in the future of fixed income investing in India.

FAQs on How to Buy Corporate Bonds in India

1. What are the risks associated with investing in corporate bonds in India?
   Investing in corporate bonds in India carries several risk like

• Credit Risk: The risk that the issuing company may default on interest payments or principal repayment.
• Interest Rate Risk: The value of corporate bonds can decline if interest rates rise, as new bonds may be issued at higher rates.
• Liquidity Risk: Some corporate bonds may not be easily tradable, making it difficult to sell them quickly without a significant price concession.
• Inflation Risk: Inflation can erode the purchasing power of the bond’s interest payments and principal.

      2. Why is KYC mandatory for investing in corporate bonds in India?

• KYC (Know Your Customer) is required for investing in corporate bonds in India to ensure regulatory compliance, prevent fraud, and maintain market integrity. SEBI and RBI mandate KYC to verify investor identities, enhance security, and foster a trustworthy financial environment. It helps in reducing risks like money laundering and identity theft while providing personalized investment advice and better customer service. Completing KYC is essential for a secure and efficient investment process.

Still wondering how to buy corporate bonds in India? Head over to Aspero to explore our large selection of premium listed bonds and start investing!