How to Invest in Corporate Bonds in India? - Step-By-Step Guide

Investing in corporate bonds can be a rewarding way to generate regular income and diversify your investment portfolio with moderate risk. Unlike owning shares, when you invest in corporate bonds, you essentially lend money to companies in return for periodic interest payments and the repayment of the principal amount at maturity.

This fixed-income nature, coupled with potentially higher returns than traditional fixed deposits, makes corporate bonds an attractive option for many investors in India. If you’re looking to understand how to invest in corporate bonds, this step-by-step guide walks you through the essentials and helps you become an informed investor.

What are Corporate Bonds?

Think of a corporate bond like a formal IOU issued by a company. When you buy a corporate bond, you are lending money to that company for a fixed period. In return, the company promises to pay you interest (known as the coupon) at regular intervals and repay your principal amount on the bond’s maturity date. These bonds differ from shares in that bondholders do not own a part of the company; instead, they are creditors with priority over equity shareholders in the event of financial distress. Corporate bonds are frequently used by companies to raise capital for expansion or other business purposes.

If you want to invest in corporate bonds India, you can do so through various channels, including SEBI-registered online bond platforms, stockbrokers, or directly during the bond’s public issuance (primary market). The bonds are also tradable on secondary markets, providing investors with the flexibility to buy or sell them before maturity. This accessibility makes corporate bonds an attractive option for Indian investors seeking steady income with moderate risk and diversification benefits.

How to Invest in Corporate Bonds in India?

To invest in corporate bonds in India, open a demat and trading account, choose bonds based on issuer rating, maturity, and coupon rate, and purchase them via SEBI-registered platforms like Bondbazaar. You’ll earn fixed interest and get your principal back at maturity.

Why Consider Investing in Corporate Bonds?

Suppose you want to earn a steady income without the volatility of stocks or the low returns of fixed deposits (FDs). Corporate bonds offer a middle ground, potentially earning returns of between 8% and 14%, while providing more security than equities. Comparing Bonds vs. Fixed Deposits (FDs), bonds usually offer higher yields, though with varying risk depending on the issuer’s credit rating.

Step 1: Understand Types of Corporate Bonds

Before diving in, it helps to know the different types of bonds:

• Secured Bonds: Backed by company assets as collateral, usually safer.
• Unsecured Bonds (Debentures): Not backed by assets, these bonds are riskier but may offer higher returns.
• Convertible Bonds: These bonds can be converted into company shares after a specified period.
• High-Yield Bonds: Issued by companies with lower credit ratings, offering higher interest to compensate for increased risk.

Knowing these types helps you tailor how to invest in corporate bonds India wisely, balancing safety, returns, and your personal financial objectives

Additional Read - Secured and Unsecured Bonds

Step 2: Research and Credit Ratings

Investing without research is like walking a tightrope blindfolded. Before investing, check the issuing company’s financial health, credit ratings, yield, and maturity tenure. Credit rating agencies assign ratings (e.g., AAA, AA, A, BBB) to bonds based on the issuer’s creditworthiness. AAA-rated bonds are the safest, offering lower yields, whereas High-Yield Bonds from lower-rated companies pay more but carry more risk.

Step 3: Choose Where to Buy Corporate Bonds

Corporate bonds can be purchased in two main ways:

• Primary Market: Buying bonds newly issued by companies directly at face value (or sometimes at a premium/discount). Companies issue bonds via public offerings or private placements.
• Secondary Market: Buying bonds from other investors through a stock exchange at prevailing market prices, which can be higher or lower than the face value.

Thanks to digital advancements and SEBI-regulated Bondbazaar, Indian investors can easily browse thousands of bonds and place orders online with zero brokerage, zero account opening or maintenance fees, and benefit from a seamless, real-time trading platform. Bondbazaar also allows users to both buy and sell corporate bonds instantly, increasing liquidity.

Step 4: Open a Trading and Demat Account

To purchase corporate bonds, you require a demat account, where your bonds are stored electronically. If you don’t have one, you can open it online through brokerages or Bondbazaar. Completion of KYC (Know Your Customer) is mandatory, and your linked bank account will receive interest payments and principal repayments automatically without any paper hassles.

Step 5: Select Bonds and Place Orders

Once your account is ready, learning how to buy corporate bonds is simple on Bondbazaar or through your broker. 

Use Bondbazaar to search for bonds by key parameters such as issuer rating, coupon rate, maturity, and price. A practical approach is to diversify across bond types and maturities—this reduces risk.

When selecting bonds, consider:

• Coupon rate (interest paid annually)
• Maturity period (time until principal is repaid)
• Credit rating (issuer’s creditworthiness)
• Call/put options (whether the issuer or investor can redeem early)

Once you've decided, place your order specifying the quantity. Bondbazaar processes payments securely and credits bonds directly to your demat account.

Step 6: Manage Your Corporate Bond Portfolio

After purchase, you can hold bonds till maturity and earn periodic income, or sell them on the secondary market if you need liquidity. Continue to monitor interest rates, as bond prices fluctuate in response to market rates.

Investing through strategies such as:

• Laddering: Buying bonds maturing in different years to reduce reinvestment risk.
• Barbell: Investing in short-term and long-term bonds only, balancing income and safety.
• Diversification: Spreading investments across sectors and credit qualities.

How to Invest in Corporate Bonds in India?

Let’s say you have ₹5,00,000 to invest, aiming for a steady income and moderate risk.

• You decide to invest ₹1,00,000 each in bonds maturing in 1, 3, and 5 years from companies rated AAA and AA.
• You pick a few high-yield bonds for smarter risk-taking with the remaining ₹2,00,000.
• Using Bondbazaar’s platform, you easily browse over 10,000 bonds, compare yields and credit ratings, open your account without any charges, and finalise your investments—all online.
• Every month, you receive interest directly in your bank account, and you have the option to sell bonds hassle-free anytime through the platform.

Bonds vs. Fixed Deposits (FDs): Which One Should You Choose?

Conclusion: Why Corporate Bonds Work for Indian Investors

Investing in corporate bonds is a great way to earn a consistent income and diversify your portfolio beyond traditional investments.If you’re asking how do I invest in corporate bonds, SEBI-regulated Bondbazaar simplifies the process by offering a simple, cost-effective, and transparent way to buy and sell bonds. The real-time trading platform of Bondbazaar, with zero charges, secure demat holding, and expert support, provides an ideal environment for both beginners and seasoned investors.

Ready to explore the world of corporate bonds and earn 8-14% fixed returns? Discover the ease of investing with Bondbazaar, where buying, selling, and managing your bond portfolio is just a click away.

Take control of your investments today. Visit Bondbazaar and start your corporate bond journey with confidence.