Corporate Bonds X Retail Investors – A Match Made By The Regulator

Ever thought about how the success of a financial product is kind of like a happily arranged marriage? Let me help you picture this: There’s a new, up-and-coming company, Company X, in need of funds to grow. But since they’re the new kid on the block, getting a bank loan with a decent interest rate is a tough nut to crack. On the other hand, there is a group of investors, with adequate disposable income, looking for alternative investment opportunities to park their money but cannot seem to find one that meets their needs.

So, here’s the thing: these two groups – the company needing funds and the investors with money to invest – they’re like two ships passing in the night, never really meeting. The company keeps borrowing at steep rates, and investors keep settling for the same old investment options. But then, along comes the regulator, like a matchmaker in an arranged marriage.

The regulator identifies this inefficiency, and creates favorable conditions for both parties to find each other and helps break the ice between the two. The regulator helps build trust between the two parties, helps them find a common ground,  and helping them build a more compatible partnership.

Corporate Bonds for Retail Investors

This is the exact scenario that has played out in the corporate bond market in the last few years. Several bold moves by the regulator, like regulating corporate bonds, forming industry body associations, reduction of ticket size for private placements and bringing corporate bonds and debt mutual funds to a level playing field in terms of taxation are steadily bearing fruit. 

The numbers don’t lie. Recent SEBI data shows public corporate bond issuances are at a four-year high. Rumor has it they’re on track to cross over INR 20K crore in value by the end of this FY. We’re seeing more bonds up for grabs, and retail participation is booming – over 1.3 million trades reported last financial year!

More and more everyday investors and high-net-worth individuals are getting into corporate bonds. Thanks to the regulator’s confidence-boosting moves, more market players are diving in, tackling the demand side too. Now, with over 15 Online Bond Platform Providers in India, even retail investors have it easy to get their hands on corporate bonds.

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