Bonds

Bond IPO, also known as bond offering, is the process of raising debt capital from the general public through bonds instead of equity in the company. Bond investments give bondholders a periodic, fixed interest rate for a particular maturity. At maturity, the company pays back the initially invested amount.

Similar to how companies do IPOs for their shares, an initial public offering (IPO) of bonds is referred to as a bond IPO, and future bond issues are known as "public issues of bonds." A firm that requires funds can choose to issue bonds to the public and apply for a bond public issue.

What Are The Benefits Of Bond Public Issues?

Bond IPOs are a favourable option for investing due to the following reasons:

1. Fixed Returns On Investment

Investing in a bond IPO can be a go-to method for investors looking for predictability and stability. The coupon rate is fixed for the entire bond term, allowing investors to receive predictable fixed income (monthly, quarterly, or half-yearly) and maintain a steady cash flow.

2. Low Ticket Size

The minimum amount of investment in a bond public issue is INR 1,000. This low entry point allows investors from different financial levels to invest in bonds. It also allows new investors to test the waters without significant risks.

3. Strictly Regulated

The Securities Exchange Board of India (SEBI) regulates the Indian securities market. It has established strict guidelines and regulations for the public issue of bonds to ensure transparency, boost trust, and protect investors' interests.

4. Exchange-Listed

Bond IPOs are exchange-listed (NSE/BSE) and are credited to the investor’s Demat account. This allows the investors to track their holdings and liquidate if needed.

5. Diversification Of Portfolio

Bond IPOs are instrumental in diversifying an investor’s portfolio. Incorporating them into an investment strategy can balance out the risks and returns of a portfolio due to their non-market-linked nature.

6. Low Risk

Bonds are considered a low-risk investment option than stocks or mutual funds due to lower volatility. Furthermore, bonds are credit-rated based on the issuer’s creditworthiness. Investment-grade bonds provide low-risk investment avenues.