Online bond platforms. Bond investment 101: Create a login ID

When Praneetha (name changed), a software engineer, was advised to invest in the bonds market, he was more than a little intimidated. All he was looking for was an investment scheme for his savings that promised low risk and high returns.

“As an amateur retail investor, I was looking for someone who could simplify the concept of bond investment for me,” he says.

He found his answer in an online platform dedicated to bond investments. In fact, amid a surge in the number of retail investors, several such platforms have popped up in the past four years. And they have the backing of government authorities and bond issuers, who are making concerted efforts to develop the bond market — both government and corporate — on par with the equities market.

Vishal Goenka, co-founder of IndiaBonds.com, credits the growing popularity of these platforms to factors such as the growth in digital transactions and familiarity with online platforms, and the rising risk appetite for investments beyond bank fixed deposits (FDs) and debt mutual funds.

Much like online shopping sites, the bond platforms offer slick user interfaces, zero costs, and easy access to information, helping democratise bond investments.

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Regulation

Online bond platforms did not find many takers initially, as there were no regulations governing them. Late in 2022, markets regulator Securities and Exchange Board of India (SEBI) released the Online Bonds Platform Provider framework, stipulating rights of users and rules for platforms, including the requirement for a debt broker licence, and limiting transactions to listed debt securities only.

Nearly 29 bond platforms — including Grip Invest, Wint Wealth, Indiabonds.com, Golden Pi, and Jiraaf — are licensed today.

However, the real game-changer was SEBI’s decision, in May 2023, to lower the minimum limit for investment in corporate bonds to ₹10,000 from ₹1 lakh.

Until then, not many retail investors were willing to part with ₹1 lakh at one go for an unfamiliar product, explains Anshul Gupta, co-founder and chief investment officer of Wint Wealth, which has 5.1 lakh registered users. Grip Invest has 4 lakh registered users, of whom 26,000 have invested. 

Innovation

To explain the attraction of bond investment, Gupta contrasts it with a low-risk, low-return product like an FD and the high-return but high-risk equities. “These are two extreme choices. A bond beautifully bridges this gap,” he says. Investors can enjoy returns of 9-12 per cent from this relatively stable asset class, he adds.

The online platforms offer corporate bonds with 8-14 per cent yields. In addition, they offer treasury bills, government bonds, and state development loans with yields of around 7 per cent, as also ultra-low-risk sovereign gold bonds and FDs. Most platforms offer a short tenure of 18-24 months.

Some, like Grip Invest, bank on curation and innovation to draw more customers. 

Under a product named Baskets, Grip Invest enables clients to invest across a collection of theme-based bonds. “It is similar to ‘smallcase’ for equity markets. You invest in a portfolio of five bonds without worrying about tenure, ratings and so on,” says Nikhil Aggarwal, founder of Grip Invest.

The site also offers a systematic investment plan, or SIP, on a subscription basis, whereby clients can invest in a bond every month.

Exclusivity

Many bond platforms are now attempting to stand out from the crowd by listing exclusive bonds. While secondary sale of bonds is a common offering, available through traditional brokers as well, platforms like Wint Wealth and Grip Invest are increasingly offering exclusive primary issues of bonds. In fact, nearly 50 per cent of their listing is of primary origination.

Grip Invest also offers securitised debt investments, or SDIs, which are fixed-income debt instruments that are backed by a pool of lease rentals, invoices, loans, and bonds, with yields of 8-15 per cent.

“The income from those assets is converted into an investment instrument. Nearly 80 per cent of what we offer is exclusive to us, whether SDI or bonds,” says Aggarwal.

To offer clients added flexibility, the platforms are exploring the option of allowing them to sell a bond before it reaches maturity. This will also enhace liquidity on the platforms.

Technological innovations and investor education are the other areas in focus for bond platforms seeking wider reach.

“We came up with a bond directory three years ago. Our proprietary bond calculator is a mathematical and data-heavy tool, available freely to all customers. Our portfolio analysis tool allows the client to view their holdings by risk weigh, concentration risk, and cash flow,” says Goenka of Indiabonds.

As part of investor education, many platforms host blogs, YouTube videos and webinars with industry executives to simplify debt investing.

While the platforms do not charge a user fee, their primary revenue comes from the spread income on secondary issuance of corporate bonds — namely they buy inventory from debt brokers and take a 1-1.5 per cent cut from the coupon rate of the debt. 

Funding

Online bond platforms have bagged $102 million funding since 2019, according to market intelligence platform Tracxn. It peaked at $28.8 million in 2022. At $19.8 million, funding in 2024 till date is 12 per cent higher compared to a year ago but 17 per cent lower than in 2022.

Among the startups, Jiraaf raised $27 million, Stable Money $25.3 million, and Wint Wealth $22.8 million.

The growth in bond platforms in recent years is mainly due to the volatility in equity markets, making bonds a safer alternative, says Neha Singh, Co-founder of Tracxn. Ease of use and investor education are added attractions, and favourable government policies promise to spur greater activity in this space, she says.