Alternative Investment

Grip brings Corporate Bonds with 8-11% pre-tax yield to maturity. Who should invest?

Multi-asset alternative investment platform, Grip, has announced Investment Grade rated Corporate Bonds for retail investors. Investment in these bonds starts as low as Rs 10,000 and offers 8- 11% pre-tax yield to maturity (YTM) over a tenure of 12-36 months. The Corporate Bonds offered by Grip are rated ‘A’ or above by credit rating agencies such as CRISIL, ICRA, and India Ratings (Fitch), implying a low risk of default.

Corporate Bonds are held in Demat form and listed on the stock exchanges to enable secondary trading, should the investor need to exit before maturity.

Ahead of the launch, Nikhil Aggarwal, Founder and CEO of Grip, shared details about the corporate bonds and the risks that investors should know. Edited excerpts:

How does Grip pick the right issuer and bonds?

Grip has set the following conditions for the bonds available on its platform:

  1. Bonds must be listed i.e. they would have gone through a formal listing process and got the required approval from regulatory bodies. This also ensures that the bonds are for companies which are meeting the required standards for transparency and regularly sharing business results 
  2. Bonds invested in by large institutional investors, who have the capability to perform detailed analysis before making investment decisions 
  3. Bonds rated ‘A’ or more by SEBI-regulated rating agencies like CRISIL. Bonds with such a rating are expected to have a very low chance of default 

What kind of investors would find this offering useful?

Bonds are generally an attractive investment opportunity across investor profiles. They offer 70-100% more returns than fixed deposits and as they are ‘A’ and above rated the risk-reward ratio is attractive. All investors should definitely consider having bonds in their portfolio, though the allocation may vary depending on overall objectives.

For example, an investor with a higher risk appetite may consider a lower allocation to bonds and a higher allocation to stock markets or alternative assets like unlisted equity. A more risk-averse investor should consider a higher allocation to bonds and a lower to stock markets. 

How are these bonds secured?

In a secured bond, the issuer of the bond provides specific assets as collateral for the bond and offers a safer investment option as compared to unsecured bonds

How can an investor liquidate these bonds?

All bonds available on Grip are listed on the stock exchange. An investor can use any trading platform to sell these shares. 

What are the risks involved with corporate bonds?

There are three types of risk an investor must be aware of 

  1. Issuer/Credit Risk:  Although the bond is an ‘A’ rated instrument and secured the issuer may not be able to pay back due to extreme circumstances such as bankruptcy
  2. Liquidity Risk: This product is listed on exchanges but might not be actively traded
  3. Interest Rate Risk: There is an inverse relationship between interest rates and the price of a bond. If interest rates increase, the price of a bond may fall, and the investor may have to incur losses if you plan to sell the instrument before the maturity date.

(Views and comments on Corporate Bonds above are those of the respective commentator. Investors should consult their financial advisors before making any investment)

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