Thanks to SEBI’s decision to reduce the face value of private placements of corporate bonds from 10 lakhs to 1 lakh in October 2022 and the mainstreaming of Online Bond Platforms (OBPs), During the period from July to September 2023, it was observed that non-institutional investors subscribed to 4% of the total amount raised as compared with the general average of less than 1%.
From July to September 2023, the total volume of trades undertaken on the OBPs aggregated to around Rs 333 crores by 1974 investors.
- To further improve the participation of retail investors and deepen the corporate bond market, SEBI has proposed in the latest consultation paper to further reduce the face value of privately placed corporate bonds to 10000 Rs. from 1 lakh.
This move can lead to greater retail participation in the bond markets making it more affordable for retail investors. This is most likely to be a win-win scenario for both parties as it can lead to a reduction in the cost of capital for companies as well due to greater demand.
@nithin shared an interesting perspective on this topic in his tweet :
Maybe the right products for most investors are government bonds and relatively safe corporate bonds from quality issuers like PSUs and AAA-rated entities. That is instruments with a lower risk profile than stocks but higher returns than banks FDs. These are good instruments for them to accumulate some savings and then invest in equity mutual funds and direct equities.
Hopefully, companies think of small investors as potential investors. If holding a company’s stock can help improve brand awareness, maybe having bonds can also do that.
Link to SEBI’s consultation paper:
More reading on the latest growth projections and other insights related to the corporate bond market:
What are your thoughts on this latest proposal by SEBI ?
