The bull market continues to run on strong legs with new highs being scaled. With valuations being expensive, the sustainability of the bull run is uncertain. Also, India is at the peak of the interest rate cycle, with rates set only to trend downward in the near term. At this juncture, bonds can be a safer bet.

Investing in bonds for retail investors is convenient now than ever before, since the advent of online bond platforms. IndiaBonds is one of them. Here we review BondCase, IndiaBonds’ latest offering.

About the product

A BondCase is a curated collection of bonds bundled together with a common characteristic. For example, the PSU BondCase is a collection of bonds issued by a few PSUs.

Each BondCase must have at least three bonds (bonds with three unique ISINs) and up to seven. The minimum investment in a BondCase is ₹3 lakh and the maximum is ₹1 crore. Apart from five pre-built bondcases, investors can also customise from 45 bonds available on the platform.

Bonds on offer

The bonds offered vary widely on aspects such as the type of issuer, credit rating, YTM (yield to maturity), time to maturity, frequency of cash flow and the type of security. Most of the bonds are of NBFCs’, while there are also those from banks such as Yes Bank and ESAF Small Finance Bank. These are investment-grade bonds with credit ratings ranging between BBB+ and AAA and so, the lower-rated bonds offer higher YTMs (up to 14.65 per cent) than the higher-rated ones (as low as 7.22 per cent). The time to maturity ranges from six months to seven years.

To cater to the varied goals of investors, the bonds offer varied cash-flow profiles such as monthly payout of interest and principal, quarterly/ half-yearly/ annual payment of interest – principal repayment at maturity, and so on. Both secured and unsecured bonds are available on the platform. While in general, such bonds are secured against a pool of loans advanced by the bond issuer, bank bonds available on the platform are unsecured and subordinate tier-II bonds (will have lower priority of repayment on liquidation).

Key features

The investing process is quite simple. It requires signing up, linking PAN, Aadhaar, bank account and demat account as part of the KYC process, choosing the bonds and payment through net banking. Once the investment is successful, the bonds show up on a portfolio dashboard exhibiting how the portfolio is diversified in terms of issuer, credit rating and so on. The portfolio also shows the timeline of upcoming cash flows.

All bonds available on the platform are listed, giving the investors the option to sell their holdings on the stock exchange before maturity. IndiaBonds also offers investors the option to sell bonds on its platform. Investors need to raise an online request (on the portal itself) and contact their assigned bond manager to initiate the sale. For investors who do not wish to part with their bonds for want of liquidity, the platform also offers to arrange loans against the security of such bonds.

For investors to make informed decisions, the platform enables downloading the credit rating report and the key information document (KID) of the bond issuer. The credit rating report lays out the rating rationale, strengths and key monitorables. The KID is like a prospectus that contains all disclosures such as credit rating, cash flows and audited financial statements.

Bonds are not without risk. While savvy investors can make investment decisions based on the above, the rest can rely on their financial planners as it may be tough to decide which bond strategy – accrual, duration, barbell, etc. – would suit them. A wrong choice can lead to losses or sub-optimal returns even in the case of bonds.

Ultimately, mapping your debt portfolio to goals and asset allocation is critical. Choice of bonds and the underlying strategy depend on those factors, and not so much on the platform.

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