Corporate bond is a bond issued by a corporation to raise money from capital market. Unlike equity shares, bond holders do not have any ownership interest in the company when they buy corporate bonds.

When one buys a corporate bond, one lends money to the "issuer," the company that issued the bond. In exchange, the company promises to return the money, also known as "principal," on a specified maturity date. Until that date, the company usually pays you a stated rate of interest, generally semi-annually.

Corporate bonds are debt securities which are generally considered as long term investment option. The maturity period of these securities ranges from 1 year to 15-20 years. Corporate bonds are mostly listed with major stock exchanges (BSE and NSE) in India. Corporate bonds are also known as securities that do not have any equity element attached to it.

The key factors to observe while choosing an NCD

a. Whether it is a secured NCD or an unsecured NCD
b. What is the interest coverage ratio of the company (Should be atleast 2.5 times and above). If less than 2.5 avoid. Interest coverage is defined as Earnings before interest tax and depreciation/Interest
c.Debt/EBITDA should not be more than 4 times
d. Should be a good brand name that you have already heard of. Otherwise better to avoid.


Source: Chittogarh.com