Bonds signify debt obligations – and therefore are a form of borrowing. If a company issues a bond, the money they receive in return is a loan and must be repaid with interest over time. The buyers of bonds, then, are essentially lenders. Generally, these lenders give some asset such as building or plant as an assurance of repayment. In case, the borrower fails to repay the loan, these assets that are known as “collateral”, would be sold in the market and the lender would get the money in proportion to his lending.

The Bond Market in India with the liberalization has been transformed completely. The opening up of the financial market at present has influenced several foreign investors holding upto 30% (approximately) of the financial in the form of fixed income to invest in the bond market in India. Broadly, there are 4 types of entities that issue bonds in India:

  • Government Bonds: These bonds are issued by Government of India and various state governments to finance their projects and perform various functions.
  • Quasi-Government Bonds: These bonds are issued by entities that are formed by the Government of India or through various acts of parliament or specific institutions that are tasked by the union government to perform a certain action. Such institutions, such as NABARD and NHAI, use these borrowed funds to perform their functions.
  • Municipal Bonds: Certain Municipal corporations also issue bonds to fund their projects of city building.
  • Corporate Bonds: Bonds issued by private or public corporates are called as corporate bonds. They issue bonds for a variety of reasons such as the expansion of their existing capacity, launching a new business, etc.

At G K Globas, we help our clients in identifying the right bond that they should invest in after understanding their needs, risk-taking appetite, time horizon and a bunch of other factors so that the return on investment meets expectation.