Before I decide whether a bond belongs in my portfolio, I like to step back and answer two basic questions: what are corporate bonds, and what “type” am I actually buying? Corporate bonds are debt instruments issued by companies to raise money for business needs—expansion, refinancing, working capital, or project funding. In return, the investor receives interest (or a price appreciation in certain structures) and the principal back at maturity, subject to the issuer meeting its obligations.

In the context of indian corporate bonds, the “type” of bond matters as much as the coupon or yield. Two bonds from the same issuer can behave very differently depending on their security, seniority, and embedded features. Here are the key categories I review.

1) Secured vs Unsecured

• Secured bonds are backed by specific assets or a charge on assets. If things go wrong, secured creditors generally have a stronger claim on recovery.
  
  
• Unsecured bonds rely on the issuer’s overall credit profile without a direct asset backing. They can still be high quality, but the risk assessment leans more heavily on financial strength and cash flows.
  
  

2) Senior vs Subordinated

• Senior bonds are higher in the repayment hierarchy. If an issuer faces stress, senior obligations typically get paid before subordinated ones.
  
  
• Subordinated bonds carry higher risk because they sit lower in priority. Because of this, they often offer higher yields—but I treat that extra yield as compensation for taking a deeper credit risk.
  
  

3) Fixed Rate vs Floating Rate

• Fixed-rate bonds pay a stable coupon. I find them easier to plan around, but their market prices can fluctuate when interest rates move.
  
  
• Floating-rate bonds have coupons linked to a benchmark (plus a spread). They can reduce interest-rate risk when rates rise, but the cash flows are less predictable.
  
  

4) Callable and Puttable Bonds

• Callable bonds allow the issuer to redeem early, usually when rates fall and refinancing becomes attractive. I pay close attention to call dates because my expected holding period could shrink.
  
  
• Puttable bonds allow me (the investor) to sell back to the issuer on specified dates, which can improve flexibility if I want an exit option.
  
  

5) Convertible Bonds

• Convertible bonds can be converted into equity under defined terms. They sit between debt and equity in behaviour: there is bond-like protection through interest payments, but upside can improve if the company performs well and the equity value rises. The trade-off is that coupons may be lower than comparable non-convertible bonds.
  
  

6) Zero Coupon Bonds and Deep Discount Structures

• Zero coupon bonds do not pay periodic interest. Instead, they are issued at a discount and redeemed at face value. I like to model these carefully because the return profile is driven by purchase price, holding period, and redemption value—along with liquidity and credit risk.
  
  

7) Perpetual Bonds

• Perpetual bonds have no fixed maturity date (though they may have call options). Because duration can be long, price sensitivity to rates can be meaningful. I treat perpetuals as a distinct allocation rather than a plain-vanilla bond substitute.
  
  

8) Thematic Bonds: Green, Social, and Sustainability

These are corporate bonds where proceeds are earmarked for specific eligible projects (renewable energy, clean transportation, social infrastructure, etc.). I still assess them like any other bond—credit quality first—while also checking reporting standards and use-of-proceeds disclosures.

How I choose among them

Once I understand the structure, I evaluate: credit ratings and financials, issuer business stability, security and covenants, liquidity, and how the bond fits my time horizon. In indian corporate bonds, issuance format (public issue vs private placement) and market liquidity can also influence pricing and exit options.