Corporate Bonds are debt instruments that are issued by various corporates across the globe.
They are relatively more secure than equity instruments, though one must examine the rating before buying corporate bonds in India.
Corporate bond definition
A corporate bond is nothing but a debt instrument issued by a company and sold to investors, both retail and large institutional investors.
The payment of interest and maturity on these bonds tend to have the backing of the company from the revenue stream of the company. In many cases, the company's assets are used as collateral.
Difference between corporate bond and government bond?
Corporate bonds are considered to be less secure as against government bonds. The only difference is that one of them is issued by the government and the other by corporate. Interest rates might be slightly lower in the case of government bonds.
Where to buy corporate bonds In India?
Corporate bonds are hardly issued in India for retail investors. Most of the bonds that are issued are private placed with large institutional investors. Retail investors have to invest in tax free bonds and non convertible debentures.
Corporate bonds listed on the NSE and BSE totalled around Rs 32875.53 in trading volumes for the month of August.
It's difficult to say whether these bonds also include non convertible debentures and tax free bonds that were issued.
Last year and this year several big corporates raised money through the bond route including the likes of Hindalco Industries, Sterlite Industries and construction giant Larsen and Toubro. This is the most preferred route for many corporates in India.
Tax free bonds in India
Most of the corporate bonds listed as mentioned earlier take the form of NCDs or tax free bonds and these are the only listed options that are available in the debt segment of the capital market for retail investors.
Tax free bonds are issued by government owned companies and the interest on these are tax free in the hands of the investor.