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Bond name

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CRISIL
AAA
8.75%Annually20 Mar 26
CARE
AAA
8.65%Semi Annually15 Jan 24
INDIA
A-
10%Monthly21 Apr 23
CRISIL
AAA
9%Semi Annually30 Mar 26
CRISIL
AA
9.35%Annually31 Oct 23
Unrated
Variable CouponQuarterly31 Mar 51
CARE
PP-MLD A+ (CE)
Variable Couponon Maturity24 Jan 30
INDIA
A-
0%Never13 Oct 27
Unrated
SBI BASE RATE PLUS 300BPSNever30 Sep 28
Unrated
NIFTY LINKEDon Maturity16 May 23
INDIA
AA(CE)
7.30%Quarterly31 Dec 26
Unrated
16%Quarterly27 May 23
Unrated
NIFTY 50 INDEX LINKEDon Maturity21 Jun 23
Unrated
0%Never30 Sep 30
CRISIL
AAA
5.05%Annually25 Nov 22
Unrated
0%Never29 Jun 25
CRISIL
AA+
3M T BILL LINKAnnually20 May 24
Unrated
13.50%Monthly26 Feb 23
Unrated
0%Never31 Mar 30
Unrated
13.75%Semi Annually16 Sep 29
1-20 out of 15,859

Corporate Bonds in India

Corporate bonds are bonds issued by corporations/companies. All Bonds that are not issued by the government (state or central) are corporate bonds.

As per the Companies Act of 2013, a company is defined as an artificial legal person, formed by a person or a group of persons to do business.


How does a Corporate Bond work?

Investors who buy corporate bonds receive regular interest payments (interest amount is dependent on the investment made and interest rate or coupon rate of the bond) and get their initial investment (principal) back on maturity date or when they sell the bond to another investor. It is important to note that if the bond is sold before maturity, the investor may get an amount greater (capital gains) or lesser (capital loss) than his initial investment. This is also called price risk or interest rate risk.


Types of corporate bonds in India

There are two types of corporate bonds based on the issuer type i.e., Private sector bonds and PSU bonds issued by public sector companies.

Another categorization could be based on the credit rating of corporate bonds. Credit rating is an indicator of the bond issuer’s financial strength and repayment capability. It ranges from AAA (highest credit rating) to D (lowest credit rating indicating that the bond has defaulted)


Credit rating of corporate bonds

Credit rating is a way of rating a bond issuer’s financial position and repaying capacity. The range of credit rating is from AAA (highest) to D(lowest). Low risk investors should try to invest in AAA and AA rated bonds only since they are the safest.

Private Sector Bonds vs PSU Bonds

Because of government backing (and sometimes guarantee), PSU Bonds are considered to be safer than bonds issued by private sector companies.

HDFC Bank and Reliance industries are examples of Private Sector Bonds

UP Power Corporation and HPCL are examples of public sector companies (PSUs)


Examples of corporate bonds



Issued by private sector company

Issued by PSU

Bond ISIN

INE477S08100 INE134E08IO0

Bond issuer

Tata Motors Finance Solutions

Power Finance Corporation

Interest rate

7.48%

7.23%

Maturity date

25/02/2025

05/01/2027


Are corporate bonds a good buy?

Yes, corporate bonds are a good buy for investors willing to take some risk in the fixed income asset class. This is because corporate bonds are considered to be riskier than government bonds. Simply put, corporate bonds offer higher returns than Government Bonds but are slightly riskier too. If you can handle the extra risk, corporate bonds are a great investment option for you. Many investors prefer corporate bonds over fixed deposits for the debt allocation in their portfolio.


Are NRIs eligible to invest in corporate bonds?

NRIs are eligible to invest in corporate bonds issued by PSUs. NRIs are not eligible to invest in corporate bonds issued by private sector companies.


High yield corporate bonds

Corporate bonds with credit ratings of A and lower offer higher interest rates (and hence yield) than higher rated bonds. This is to attract investors and compensate them for the higher risk they are taking by investing in these bonds. Hence these bonds are referred to as ‘high yield bonds.’ 


Taxation of corporate bonds

Taxation on interest of corporate bonds: Interest earned from corporate bonds is added to your annual income and taxed as per your marginal income tax slab rate.


Taxation on capital gains of corporate bonds: For listed corporate bonds, the long term (more than 36 months) capital gains tax rate is 10% and the short term (less than 36 months) capital gains tax is the investor’s marginal income tax slab rate. For unlisted corporate bonds, the long term (more than 12 months) capital gains tax is 20% with indexation benefit and the short term (less than 12 months) capital gains tax is the investor’s marginal income tax slab rate.


How risky are corporate bonds?

Different corporate bonds have different risks. The first risk to consider is the credit default risk which is the risk that the issuer will not be able to make interest payments or return the principal. Investors should choose an issuer that has a credit rating in line with their risk level. AAA rated corporate bonds are safest and should be chosen by the most conservative investors. Further, all bonds are subject to risks like duration risk, liquidity risk, reinvestment risk etc.


Corporate bonds versus corporate bond mutual funds

The main difference between corporate bonds and corporate mutual funds is when you invest in a corporate bond you invest in a single bond but when you invest in corporate mutual funds you invest in a portfolio of select corporate bonds.


The following table highlights all the important differences between corporate bonds and corporate bond mutual funds.



Corporate bonds

Corporate bond mutual funds

Definition

Bonds issued by private companies and PSUs

Mutual funds that invest in AAA rated corporate bonds

Structure

Individual bond issued by one company

A basket of mostly AAA rated corporate bonds

Suitable for

Everyone

Retail investors and HNIs

Risk

Relatively higher

Lower because of diversification

Returns

Potentially higher

May be lower or higher depending up on the MF

Min. investment

Rs. 1,000 and higher

Rs. 500


Risks of Corporate Bonds

Various risks are involved in corporate bonds investments. Some of the important ones investors should consider are credit default risk, duration risk, liquidity risk, reinvestment risk and interest rate risk. It is important to note that the risks involved in corporate bonds are generally higher than the risks of investing in government bonds.


Corporate Bond Rates

Investing in corporate bonds has a few advantages. First advantage is that the corporate bond rates are higher than government bonds rates. However, corporate bonds are riskier than government bonds. Bonds with higher credit ratings like AAA Rated Bonds or AA Rated Bonds are only slightly riskier while bonds with lower credit ratings (A and below) are way more riskier. 


Are corporate bonds better than FDs (fixed deposits)

For some investors corporate bonds may be better than fixed deposits. If you are okay with taking a slightly higher risk, you can consider corporate bonds instead of fixed deposits. For this risk, you will get higher returns as well as relaxed taxation (if you hold the bond for 3 years or more).


How to identify the best corporate bonds?

Different corporate bonds are suitable for different investors. Corporate Bonds with AAA and AA credit ratings are best for investors with low tolerance for risk. Investors with higher risk tolerance would find A or even BBB rated corporate bonds to be the best for them. Investors should also consider the yield and interest rate offered and align the maturity date with their investment horizon to identify the best corporate bonds for themselves.

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Trusted by experts

Still got questions? We’re here to help.

If you are investing under professional guidance, you can invest in corporate bonds. It is important to note that corporate bond mutual funds are safer than corporate bonds because corporate mutual funds invest in a basket of AAA-rated bonds.
Credit rating agencies assess the financial strength and ability to repay debt obligations. This helps them assign credit ratings to bond issuers and issues.
If you are an existing investor, Dezerv is the best website to invest in corporate bonds because the bonds offered undergo due diligence and are hand-picked by experts.