Startup Companies Allow Indian Regular Investors To Purchase Corporate Debt

In India, start-up companies providing corporate bonds to individual investors are expanding.

During the pandemic, at least ten new financial technology platforms arose with the goal of capturing a piece of the $1.9 trillion markets for bank time deposits. They guarantee substantially greater interest rates by investing in corporate bonds, which are considered riskier and higher-yielding debt.

As it grapples with the government’s record borrowing plan, the corporations are banking on initiatives by the Reserve Bank of India to stimulate retail participation in sovereign debt. Of course, the dangers are greater for individuals who want to invest in corporate bonds through unregulated platforms that allow investors to participate with as little as 10,000 rupees.

New businesses are attempting to ensure investors that they are doing all possible to safeguard their customers. Previous credit crises in India include the collapse of infrastructure financier IL&FS in 2018, Franklin Temple ton’s decision to wind down part of its India debt funds in 2020, and Yes Bank’s reorganization in the same year, which resulted in bondholders losing their whole investment.

“Before providing any corporate bond, we handpick bonds, analyze the cash flow of the issuing firm, and do a comprehensive risk assessment,” said Ajay Manglunia, managing director and head of institutional fixed income at JM 

Financial Products Ltd., which operates Manglunia was previously the head of Edelweiss Financial Services Ltd.’s bond markets unit, one of India’s leading non-bank financial organizations.

The startups provide a wide selection of bonds to its customers, ranging from those issued by Bajaj Finance Ltd., the country’s largest consumer goods lender, to Muthoot Fincorp Ltd., a non-bank financial institution with an A+ rating.

Some of the websites are subsidiaries of financial institutions. For example, a unit of Axis Bank Ltd., the leading rupee corporate bond arranger from 2007 to 2021, launched Yield, an online platform last year. Tipson’s Group, one of the largest participants in the Indian debt market, owns

Many of the parent corporations are active in privately placing corporate bonds. The subsidiaries then sell these holdings to their clients while also obtaining shares from other banks and the secondary market.