Public Sector Undertakings (PSU) Bonds

PSU bonds in India are bonds issued by Public Sector Undertakings (PSUs) to raise funds from investors. PSUs are government-owned companies where government shareholding is generally more than 51%. They operate in various industries such as oil and gas, power, banking, and telecommunications. These companies raise funds through the issuance of bonds to finance their capital expenditure, expansion plans, or to refinance their existing debt.

Some examples of PSUs offering bonds are:

• Bank of Baroda (BOB)
• State Bank of India (SBI)
• Mahanagar Telephone Nigam Limited (MTNL)
• National Highway Authority of India (NHAI)
• Rural Electrification Corporation (REC)
• Power Finance Corporation (PFC)

Types of PSU Bonds

• Tax-free Bonds These are bonds that offer tax-free interest income to investors. Tax-free bonds are issued by PSUs such as NHAI (National Highways Authority of India), IRFC (Indian Railways Finance Corporation), and PFC (Power Finance Corporation) among others PSUs.
• Secured Bonds These are bonds that are secured by the assets of the issuing PSU. Secured bonds are considered less risky than unsecured bonds since the assets of the company can be used to repay the bondholders in case of default.
• Unsecured Bonds These are bonds that are not secured by any collateral or assets of the issuing PSU. Unsecured bonds are considered more risky than secured bonds and therefore offer a higher rate of interest to compensate for the additional risk.