When most people hear the term IPO, they think of shares being offered to the public for the first time. But the world of investing has more to offer than just equities. A lesser-known but equally important option is the bond IPO. This type of public offering allows companies or government-related institutions to raise funds from the public through bonds instead of shares.

If you have been thinking about safer investments that offer fixed income, it is worth understanding how bond IPOs work and how they fit into the broader bond market in India.

The Basics of a Bond IPO

A bond IPO is a way for a company or financial institution to borrow money from the public. Investors who apply in this offering lend their money to the issuer. In return, they receive interest at a fixed rate and the promise of getting back the full amount at the end of the bond’s term.

Unlike shares, bonds do not give you any ownership in the company. Instead, they make you a lender. The details of each bond IPO—such as interest rate, duration, credit rating and repayment terms - are shared in an official document before the offer opens.

How the Process Works

Here’s how a bond IPO generally works from start to finish:

Announcement and Prospectus
The issuer announces its intention to offer bonds and publishes a prospectus that lays out all the terms. This includes how much money it wants to raise, the coupon rate (interest), repayment period and credit rating.

Subscription Period
The offer is opened for a few days. During this time, investors can submit applications online or at designated banks and investment platforms. Most bond IPOs have a minimum application size of ₹10,000.

Allotment and Credit to Account
Once the offer closes, the bonds are allotted. If your application is accepted, the bonds are credited directly to your demat account. In some cases, the bonds are also listed on stock exchanges like NSE or BSE.

Interest and Maturity Payment
After allotment, the bondholder receives interest payments at regular intervals—typically every six months or once a year. At maturity, the issuer returns the original investment amount.

Why People Choose Bond IPOs

Predictable Income
One of the biggest attractions is the fixed interest. Unlike stocks where returns can fluctuate, bondholders know in advance what they will earn.

Lower Risk
Most bond IPOs are rated by agencies like CRISIL or ICRA. These ratings help investors assess how safe the investment is. Government-owned companies or firms with strong financials usually carry higher ratings.

Access for Regular Investors
Bond IPOs are not limited to large institutions. Individual investors can participate with relatively low amounts. This gives more people a way to enter the bond market.

SEBI-Regulated Process
Since the process is regulated by SEBI, investors are protected by clear rules and transparency.

What to Keep in Mind

• Taxable returns: Interest earned from bonds is added to your income and taxed accordingly
• Market price can vary: If you sell the bond before maturity, the price may be higher or lower depending on market interest rates
• Check the issuer’s background: Read the prospectus carefully and look for credit ratings before you invest
• Liquidity may be limited: Even if the bond is listed on an exchange, it may not always be easy to sell

Closing Thoughts

A bond IPO offers a straightforward way to earn fixed returns while keeping risk in check. It is a valuable option for those who prefer stability over high but uncertain gains. With more companies tapping into the bond market through public bond issues, investors now have better access to fixed income opportunities than ever before.

If you are building a long-term portfolio and want a steady source of income, a bond IPO might be worth your attention. As always, make sure to read the terms carefully and align your investment with your financial goals.