Buying corporate bonds less than it's face value in secondary market when maturity is less than 2 year

Bonds
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Hi, I am very new to bond markets. I do see some corporate bonds are trading less than its face value. Take example of SRTRANSFIN or refer below screen shot with ISIN number

  • face vale is 1000 and

  • currently trading around the price range of 970 , less than it’s face value.

  • with coupon rate of 9.40 and maturity is less than 2 years

. So if I invested my amount in this bond, let’s say I buy 100 units for Rs. 97,000 , at the end of maturity period I will get one lakh rupees also in two years I will get 9.40% in coupon rate. Consider I am not going to sell in two years . So I am not bothering about liquidity. My questions are below,

  1. If I neglect credit risk of company going default, I hope this wont happen for this company in 2 year, is there any other risk buying this bond.

  2. Why it is trading less than it’s face value even credit ratings are good ?

Answers are appreciated and thank you all in advance.

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@Bhuvan

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Go for it if you see a seller at that price…

4

Thanks @AJ007. So do you see any other risk in this bond ? I am curious to know why it is traded at this price .

5

nothing jumps out. I see other series for shriram which are priced even lesser… i think we are just assuming that this company will survive…

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Yes AJ. You are right. Based on the assumption of the assumption of this company will survive , I am calculating this profit ratio.

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Assuming that the company doesn’t default, you will receive the money on maturity.

Credit ratings don’t reflect all the known risks. ILF&FS was AAA a month before it was downgraded 9 times in a single day. DHFL was AAA too. NBFCs, in general, have had a horrible time on the past 2-3 years and investors generally perceive them to be risky.

Maybe, the smart people know that there are other financially material risks. Just looking at ratings is a bad way to invest in a bond. You will have to look at other financial metrics among other things.

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8

You can also this video -

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