Corporate Bonds

A debt instrument issued by a company (or NBFC/bank) to raise funds for expansion, operations, or refinancing. When you buy one, you’re lending money to the issuer in exchange for periodic interest (coupon) payments and return of your principal at maturity.

• Primary market Apply during a fresh public NCD/bond issue via ASBA or UPI, similar to an IPO application.
• Secondary market Buy already-listed bonds through your Demat/trading account on NSE or BSE, just like a stock.
• SEBI-registered Online Bond Platform Providers (OBPPs) Platforms that curate and list bonds with mandatory disclosure of key data points — issuer, credit rating, coupon, maturity, yield, and secured/unsecured status — to make comparison easier.

Minimum face value for privately placed corporate bonds has been reduced to ₹10,000 (down from the earlier ₹1,00,000), making them considerably more accessible to retail investors than in the past.

The most common structure for retail-accessible corporate bonds in India. “Non-convertible” means the debenture cannot be converted into equity shares of the company — it remains a pure fixed-income instrument, repaid in cash at maturity. In practice, the terms “corporate bond” and “NCD” are often used interchangeably for retail products.

• Secured bonds are backed by specific company assets — if the issuer defaults, those assets can potentially be sold (via the insolvency resolution process) to recover money owed to bondholders.
• Unsecured bonds carry no such asset backing — repayment depends solely on the issuer’s ability and willingness to pay. Unsecured bonds typically offer a higher coupon to compensate for this added risk.

Listed bonds trade on an exchange (NSE/BSE) and are subject to SEBI’s ongoing disclosure requirements, giving investors more transparency and the ability to exit before maturity via the secondary market. Unlisted bonds carry no such exchange-trading facility or disclosure mandate, and generally have much lower liquidity — for these reasons, listed bonds are typically the more transparent and liquid option for retail participation.

Agencies like CRISIL, ICRA, CARE, and India Ratings assess an issuer’s ability to meet its debt obligations and assign a rating from AAA (strongest capacity to repay, lowest risk) down to D (issuer in default). As a general pattern, higher-rated bonds tend to offer lower yields (since the lender is taking on less risk), while lower-rated bonds tend to offer higher yields to compensate for the additional credit risk being taken on.

The coupon rate is the fixed interest stated on the bond’s face value at issuance. YTM is the actual annualized return an investor earns if the bond is purchased (often in the secondary market, at a price different from face value) and held to maturity — factoring in the purchase price, all coupon payments, and the face value received at maturity. YTM becomes especially relevant when buying a bond in the secondary market, since the purchase price may differ meaningfully from face value.

The credit spread is the extra yield a corporate bond offers over a comparable-maturity G-Sec (which is treated as the risk-free benchmark). It exists to compensate for the additional credit risk of lending to a company instead of the government. As a general point of reference often cited in the market, spreads in a very low range (well under 1%) may not adequately compensate for the credit risk being taken on relative to a sovereign-backed instrument — though what counts as adequate compensation depends on the specific rating, tenure, and an investor’s own risk assessment.

• Interest/coupon income is taxed at your income slab rate (except for specific tax-free bonds, where applicable).
• TDS may apply if the interest earned crosses ₹10,000 in a year, depending on the specific bond and issuer.
• Capital gains For listed bonds, gains are treated as short-term or long-term depending on the holding period, generally following the same 12-month/36-month type thresholds used for other listed debt securities. For unlisted bonds, gains are typically treated on a different timeline (a longer holding period requirement for long-term treatment), reflecting their lower liquidity and disclosure standards.
  Exact tax treatment can vary based on bond type, listing status, and prevailing tax rules — the applicable rate/threshold is generally specified in the bond’s offer document, though we’d note tax rules are periodically revised and it’s worth confirming current provisions before filing.

If an issuer defaults, resolution generally proceeds under the Insolvency and Bankruptcy Code (IBC) framework. Secured bondholders have a claim over the specific pledged assets and, in general, tend to be positioned to recover more than unsecured creditors, though actual recovery in any specific case depends on the quality/value of the underlying collateral and the company’s overall financial position at the time — recovery is not automatic or fixed at a predetermined percentage.

Buying bonds directly gives you a fixed, known coupon and maturity date, and requires you to evaluate and select each issuer yourself. A debt/corporate bond mutual fund instead pools money across many bonds, professionally managed, offering built-in diversification and typically same/next-business-day liquidity (redemption at NAV) rather than relying on finding a buyer in the secondary market. This is a structural distinction rather than a recommendation either way — the appropriate format depends on an individual’s own investment knowledge, need for liquidity, and preference for direct control versus diversification.