Bond IPO 101 – All You need to know Bond Public Issues

It’s very rare that someone may not have heard about Equity IPOs (Initial Public Offering). Front Page of financial newspapers, billboards and your financial advisors would all make sure that you know about the IPOs happening around.

But IPOs or Public market offerings are not restricted to Equities. Just like Equity IPOs are vehicles to raise equity money from public, similarly, Bond or Debt IPOs are vehicles to raise Debt Investment from public.

Borrowers raise Primary funds through Bonds via two channels – Private Placement and Public Issue. Both fund raise channels are targeted at different sets of investors. Private Placements are targeted at Institutional investors like Mutual Funds, large corporations, and other financial institutions. Whereas, in a public issue, the borrower wants increased participation from Retail & HNI investors.

So, let’s quicky dive in and understand why it makes perfect sense to invest in a Debt IPO:

1. 1. Minimum Investment of Rs. 10,000:
      While the Face Value of the bonds in Private Placement is Rs. 1,00,000, the Face value is just Rs. 1,000 in Debt IPOs. Most platforms have a minimum investment in the IPO of just Rs. 10,000. This low ticket size is an enabler for a lot of investors for whom the ticket size of Rs. 1,00,000 is a barrier.

1. 1. No KYC required:
      You don’t need to open any account to invest in a Debt IPO. Only a few details are required – your PAN, DEMAT account number and UPI id and you are good to go.

1. 1. No upfront payment:
      In IPOs, there is no upfront payment. Based on your investment application, an amount will be blocked in your bank account via the ASBA method (you don’t need to bother about this!). This blocked amount will get debited from your bank account only if the Bonds get allotted to you.

Some things to keep in mind when investing in an IPO:

1. 1. Selection of Series:
      In a Debt IPO, there are various series with different Tenors and Payment Frequency. For Eg. there can be a 2 year, 3 year and a 5 year bond some with Monthly, Quarterly or Annual Interest payouts. Even the principal can be paid out in different ways. Accordingly, the coupon and the yield would also differ across series’.

1. 1. Mode of Investment:
      Applications upto Rs. 10 Lakhs can be made online. Any investment above that would have to be made in an offline manner by filling in a form with the appropriate details.
      (On the InCred Money platform, we provide the facility for Offline applications for investments above Rs. 10,00,000).The per application limit to apply online is Rs. 5 Lakhs. You can make two applications of 5 lakh each since the total limit to invest is Rs. 10 Lakhs.

      

1. 1. First Come First Serve:
      The IPO allotment happens on a First Come First Serve Basis. Even though the Public Issue is open for a number of days, if the application crosses the total issue size offered by the Borrower, the Public Issue can be closed down earlier. Therefore, it is essential to invest on the opening date of the Public Issue to ensure allocation.Note: you can apply online only on Market working days from 10:00 am to 5:00 pm.

      (At InCred Money, we also have the facility of Pre-book the IPOs. An investor can indicate demand by pre-booking before the Opening date of the IPO. On the opening date, the investor will get a notification on their UPI app to block the funds for the IPO. Once the funds are blocked, the application would be considered as complete)

      In case of oversubscription, the applications received on the issue closing day will receive allotment on a pro-rata basis.

1. 1. What if you don’t get an allotment?
      We hope that you never face this issue! You may not receive an allotment if the details entered are invalid or such other technical reasons. In case you don’t get an allotment, the funds would be unblocked from ASBA within 1 or 2 working days.

1. No Hidden Charges
   There are no fees, brokerage or charges that you need to pay in order to make an investment through any mode.Like all investments made through the InCred Money platform, even investment under the Debt IPO will be eligible for Anytime Liquidity.
   This should definitely get you started on the Debt IPO investing journey.

   Happy Investing!

   If you have any query, please feel free to email us on connect@incredmoney.com or contact us on +91 8591871028 or +91 8928250817.