Corporate Bonds

Corporate bonds in India are debt instruments issued by corporations to raise funds from investors. These bonds are typically issued for a fixed term, ranging from a few months to several years, and pay a fixed or floating rate of interest to the bondholders. Companies opt for bonds as it is a cheaper loan than borrowing from banks or other institutions.

Corporate bonds are rated by various credit rating agencies such as CRISIL, ICRA, and CARE, based on the issuer's creditworthiness and ability to pay back the principal and interest on the bonds.

Types of Corporate Bonds

• Debentures These are bonds issued by companies to raise funds from investors. Debentures are usually long-term in nature and pay a fixed rate of interest.
• Non-Convertible Debentures (NCDs) These are similar to debentures but cannot be converted into equity shares of the issuing company. NCDs are available in various tenors ranging from 1 year to 10 years and pay a fixed or floating rate of interest.
• Convertible Debentures These are bonds that can be converted into equity shares of the issuing company at a predetermined price and time. Convertible debentures offer investors the potential for capital appreciation along with regular interest payments.
• Perpetual bonds These are bonds that do not have a fixed maturity date and pay a fixed rate of interest. Perpetual bonds can be redeemed by the issuer at a specified call date or they may be callable at any time.Benefit of this type of bond is that investor gets fixed interest income with no fixed duration of maturity.
• Zero coupon bonds These are bonds that do not pay any regular interest but are issued at a discount to their face value. Zero coupon bonds provide investors with the potential for capital appreciation at maturity.
• Foreign Currency Bonds These are bonds issued in a foreign currency by Indian companies to raise funds from international investors. Foreign currency bonds are typically denominated in US Dollars or Euros. For example- Reliance Industries Limitedd(RIL) raised record $4 Billion by selling foreign currency bonds in 2022.