BOB Securities & Giltedge Limited

Corporate Bonds

The corporate bond market comprises debt instruments issued by companies, public sector undertakings, financial institutions, and other corporate entities to raise capital from institutional and retail investors. These instruments carry a fixed or floating periodic coupon and provide for repayment of principal at maturity and together constitute one of the most actively traded segments of India's fixed income markets alongside government securities. Issuance and trading in this segment take place through electronic bidding platforms for private placements and through recognized stock exchanges for listed instruments.

By Issuer Type

Issuers in the corporate bond market can be classified by ownership and sector.

PSU / Quasi-Sovereign Bonds

: Issued by government-owned entities and infrastructure financing institutions, carrying a strong credit linkage to sovereign ownership.

Financial Sector Bonds

: Issued by banks, NBFCs, and housing finance companies to fund lending operations and capital requirements.

Corporate Bonds (Non-Financial)

: Issued by manufacturing, energy, infrastructure, and services companies to fund capital expenditure and working capital.

Municipal Bonds

: Issued by urban local bodies to fund civic infrastructure and municipal development projects.

By Credit Rating

Corporate bonds are also classified by the credit rating assigned by credit rating agencies such as CRISIL, ICRA, CARE, and India Ratings.

AAA-Rated Bonds

: Highest credit quality rating, assigned to PSU and top-tier private issuers with the lowest perceived default risk.

AA / A-Category Bonds

: Mid-tier credit quality, issued by established corporates and NBFCs, carrying moderate credit spreads over AAA benchmarks.

BBB-Rated Bonds

: Lowest rating band within the investment-grade universe, reflecting adequate credit quality alongside moderate credit risk.

Sub-Investment Grade Bonds

: Rated below BBB-, reflecting higher credit risk and comparatively limited institutional demand.

By Instrument Structure

Structurally, corporate bonds range from plain-vanilla Non-Convertible Debentures to more complex instruments.

Plain Non-Convertible Debentures

: Standard debt instruments with fixed repayment and coupon terms and no equity conversion feature.

Structured Obligations

: Instruments incorporating credit enhancement mechanisms such as guarantees or debt service reserve accounts.

Market-Linked Debentures

: Instruments whose returns are linked to the performance of a specified market benchmark or index.

Perpetual / AT1 Bonds

: Undated bank capital instruments under the Basel III framework, carrying coupon discretion and loss-absorption features.

Zero-Coupon / Deep-Discount Bonds

: Issued at a discount to face value with no periodic coupon, redeemed at par on maturity.

Convertible Debentures

: Debt instruments carrying an option for conversion into equity shares of the issuer.

By Coupon / Rate Type

Fixed-Rate Bonds

: Carry a coupon rate that remains constant throughout the tenor of the instrument.

Floating-Rate Bonds

: Carry a coupon that resets periodically against a reference benchmark such as G-Sec yields, T-Bill rates, or MIBOR.

Step-Up / Step-Down Bonds

: Carry a coupon that changes at pre-defined intervals over the life of the instrument.

By Security / Seniority

Secured Bonds

: Backed by a specific charge over the issuer's identified assets.

Unsecured Bonds

: Rank pari passu with other unsecured creditors, without a specific asset charge.

Subordinated / AT-1, Tier 2 Bonds

: Rank below senior unsecured obligations, issued primarily by banks and NBFCs as regulatory capital.

By Purpose / Thematic

A further classification is based on the stated use of proceeds.

Green Bonds

: Proceeds directed toward environmentally beneficial projects such as renewable energy or clean transportation.

Social Bonds

: Proceeds directed toward projects with defined social outcomes, such as affordable housing or healthcare access.

Sustainability / Sustainability-Linked Bonds

: Combine environmental and social objectives, or link coupon terms to defined sustainability performance targets.

Masala Bonds

: Rupee-denominated bonds issued by Indian entities in offshore markets.

Infrastructure Bonds

: Issued to fund long-tenor infrastructure projects, typically by NBFC-IFCs or infrastructure debt funds.

Powering Bond Markets, Connecting Investors.