Invest for Steady Income & Growth: 5 Corporate Bonds in India (2024)

Investments for a Profitable Future - 5 Corporate Bonds to Watch in 2024

With years of evolved prudence and lessons learned from uncertainties, many investors now look for avenues that offer a steady and predictable income. Fixed deposits serve that purpose. But are they as profitable as other investment instruments? The answer is subjective. However, if you keep fixed deposits aside for some time and look beyond the conventional, you’ll see bonds. So, let’s explore some aspects of bonds as an investment option and the top five corporate bonds to watch in 2024 in this blog.

Bonds and Types of Bonds in India

At the outset, let’s look at what bonds are and the various types of bonds in India. So, bonds are debt securities that signify a form of a loan that the issuer (governments or corporations) borrows from public individual or institutional investors. In other words, essentially, when an issuer issues a bond, they borrow money from investors in exchange for periodic interest payments and principal return upon maturity. Some common components of bonds include the following.

• Issuer: The one who issues the bond – governments or corporate companies.
• Face Value: The amount of money the bond will reach upon maturity. It is the amount the issuer agrees to pay the bondholder back at the term’s end.
• Maturity Date: As the name suggests, it is the date when the bond matures and the issuer repays the principal amount to the bondholder. Maturity tenures can be short-term, medium-term, or long-term based on the bond bought. 
• Coupon Rate: Coupons are the period of interest payments bonds make to bondholders. Thus, the coupon rate is the fixed annual rate represented as a percentage of the face value of the bond.
• Market Price: The cost at which a bondholder buys or sells the bond in the secondary market may differ from its face value. Some factors driving it can include the issuer’s creditworthiness, economic factors, interest rate changes, etc.
• Yield: It is the effective interest rate that the bondholder earns on a particular bond. It considers the current market price and signifies the total return an investment can receive from the bond. It takes interest payments and potential changes in the market value of the bond.
• Credit Rating: Credit ratings denote an issuer’s creditworthiness. The rating is given by credit rating agencies that examine an issuer’s ability to repay the debt and rate them accordingly. High-rated bonds are low-risk bonds. However, they also have lower interest rates. On the other hand, low-rated bonds may offer more lucrative returns but carry a greater amount of risk.

Let’s now look at some types of bonds in which you can invest.

• Government Bonds: The Government of India finances various national development projects by borrowing funds from the public. Since these bonds are backed by the Indian government, they are considered safe and risk-free.
• Corporate Bonds: As the name suggests, corporate bonds are bonds issued by a company to fund operational expansion, equipment purchases, projects, etc.
• NBFC Bonds: Non-Banking Financial Companies (NBFCs) also issue bonds. They are the same as corporate bonds, but with a different name, as in this case, the issuer is an NBFC.
• Floating Coupon Rate Bonds: These bonds have a coupon rate associated with a benchmark rate. It changes the variations in the benchmark rate during coupon payment. Floating coupon rate bonds are a visionary investment amidst a rising rate economy as the investor remains hedged against future interest rates.
• Fixed Coupon Rate Bonds: These bonds are the most basic category having a fixed coupon payment at predetermined fixed intervals for instance quarterly, monthly, half-yearly, etc. with a defined maturity date.
• Perpetual Bonds: These bonds pay fixed coupon rates but do not have a maturity date. Thus, they provide a fixed interest to bondholders indefinitely. Hence, they are considered a stable and fixed-income source.
• Tax-Free Bonds: PSU companies like NABARD, NHAI, REC, HUDCO, IRFC, etc., issue tax-free bonds. As the name suggests, the interest you earn on these bonds is tax-free. With these bonds, the government intends to attract investors and raise massive sums of money to fund various development projects.
• Convertible Bonds: Convertible bonds are bonds one can convert into a particular number of shares of the common stock of the issuer at the discretion of the bondholder. Thus, bondholders are given the option to convert the debt instrument into equity.

Benefits of Bond Investments

Here’s how bonds benefit investors across various timeframes.

• Steady Source of Income: Usually, bonds pay period interest payment that forms a predictable, regular, and steady source of income.
• Preservation of Capital: Bonds are usually referred to as less risky than stocks. They offer regular interest payments and repayment of principal upon maturity, thus providing a certain extent of capital preservation for investors.
• Diversification: Bonds are an excellent way of diversifying your investment portfolio. Investing in bonds, along with others can spread the investment risk.
• Priority Over Other Investors: Bonds are a debt obligation, giving bondholders priority claims on the issuer’s assets. Thus, bondholders always remain at a higher position in the investor hierarchy and offer a certain degree of security.
• Risk Management: Bonds can help investors manage their risks efficiently. Investors can choose bonds with varying maturities and characteristics to align with their investment goals and objectives.
• Inflation Hedge: Bonds like Treasury Inflation-Protected Securities (TIPS) provide inflation protection. They do so by adjusting the principal value in response to variations in the Consumer Price Index (CPI), enabling investors to maintain their purchasing power.
• Liquidity: Investors can sell bonds seamlessly. Such an extent of liquidity can benefit people who need urgent funds.

5 Bonds to Look for in 2024 on Altifi

Amidst thousands of bonds available, choosing the right one proves crucial from the viewpoint of a profitable future. So, here are five bonds to watch for in 2024 on Altifi.

Samunnati Financial

Samunnati Financial is a senior unsecured loan with a BBB rating. It has been available since January 24, 2024, and offers monthly payments at a yield of 13.50 per cent. The bond requires investors to invest a minimum of Rs. 90,703.77.

NeoGrowth

NeoGrowth is BBB rating, a senior secured loan with a 12 per cent yield. It offers quarterly payments and requires a minimum investment of Rs. 80, 846.04. The bond is currently 93 per cent sold out.

Star Housing Finance

Star Housing Finance is another senior secured loan with a BBB rating. It is available since November 7, 2023. The bond offers monthly payments and a yield of 13.50 per cent. The minimum investment required is Rs. 93,687.82.

Navi Finserv Limited

Navi Finserv is an A-rated, senior secured loan with a 10.90 per cent yield. The bond is available from August 2, 2023. It offers monthly payments and requires a minimum investment of Rs. 1,001.06.

IKF Finance

IKF Finance is an unsecured loan with an A rating, quarterly payments and a 10.50 per cent yield. The bond is available from May 4, 2023, and requires a minimum of Rs. 63,306.81.

Are you looking to invest in bonds in 2024? Choose Altifi and unlock access to various bond options. Click to sign up with us and explore the bond investment options listed on our website.

Disclaimer: The contents of this article should not be construed as tax or financial advice. Readers should seek advice from their tax or financial advisor before making any investment decision.