Corporate Bond

Investments

Corporate bonds are debt instruments issued by companies to raise funds, paying regular interest (coupon) and returning principal at maturity. They offer higher yields than government bonds but with higher credit risk. Direct bond investment requires demat account and significant ticket size.

In detail

Direct corporate bond investment in India:nBond platforms: Wint Wealth, Grip Invest, TheFixedIncome, RBI Retail Direct (only for G-Secs)nMinimum: Rs 1,000-10,000 depending on platformnTenant quality: always check credit rating (CRISIL/ICRA/CARE)nnFor retail investors, debt mutual funds are more practical: they provide diversification (not one company's default risk), professional management, and better liquidity.nnBond math: inversely related to interest rates. When rates fall, bond prices rise (capital gain). When rates rise, bond prices fall.

Formula

Bond price = Sum of PV of coupons + PV of principalnDuration x Interest rate change = Approximate % change in bond price

Real-life example

🇮🇳 India example

Arun buys Tata Capital 8.5% corporate bond (Rs 10,000 face value). Gets Rs 850 annual interest for 3 years. Then Rs 10,000 principal back. At 30% tax: after-tax return = 5.95%. If rates fall 1%: bond price rises to approximately Rs 10,260 (capital gain if sold early).

Frequently asked questions

Should retail investors invest in individual corporate bonds or debt funds? ▼

Debt mutual funds are usually better: diversified across many bonds (reduces single-issuer risk), professional management for credit analysis, better liquidity, lower minimum investment. Direct bonds suit HNIs with Rs 10L+ for specific high-yield needs.