This article analyses the Adani Enterprise Bond Offering for retail investors to help understand whether retail investors should invest in it or not.

📚 Topics covered:

• What are important points about the Adani Enterprises Bond issue?
• Who should invest in Adani Enterprises Bond issue?
• Who should not invest in Adani Enterprises Bond issue?

What are important points about the Adani Enterprises Bond issue?

These are the main points that any prospective investor must keep in mind before investing in these bonds:

• first-ever public bond issue from an Adani Group company for retail (₹10,000 or more) investors
• offering open from 4-17 September, 2024
• Rating of A+ from CARE. The bond issuer is Adani Enterprises
• Taxation: slab rate on interest (10% TDS), 12.5% tax on capital gains after one year
• Investment starts at ₹10,000 onwards, HNI category applicable after ₹10 lakhs
• can be purchased online from bond trading platforms
• yields are 9.25% (2 years), 9.65% (3 years), and 9.90% (5 years) for both annual (or quarterly) interest payments (yield = annual coupon) and cumulative options. Note: Cumulative returns will be higher than interest payout due to at-slab tax on coupon payments

As per news articles, the issue has been fully subscribed on the first day itself on 4th September at the time of market close at 4pm IST

Who should invest in Adani Enterprises Bond issue?

Investors who meet the first and at least 2-3 of the other categories may consider investing:

• Who understand that the A+ credit rating indicates a higher risk of loss of both principal and interest vs. higher-rated bonds: Frequently asked questions on Credit Rating: the complete guide
• Need current income but have a low (less than 30% tax slab) tax rate
• Do not need current income and would be happy with the cumulative option given the high yield and low (12.5%) tax on capital gains: Understanding tax deferment: how this concept improves your investment returns?
• Understand the concept of concentration risk and will not be exposing too much of their total portfolio to one issuer (in this case the Adani group)
• Understand that exiting the investment before maturity will be difficult unless somehow they can find a buyer for these bonds at an acceptable price (remember that if there are only a few buyers, they control the price)

Who should not invest in Adani Enterprises Bond issue?

Investors who meet even a few of these categories should avoid investing:

• Not sure where these bonds fit in their overall portfolio
• No/Minimal prior investment experience in investing in corporate bonds
• Not faced a credit event in previous debt investments (e.g. delayed payments in bonds, segregated portfolios in debt mutual funds etc.)
• Not sure if their risk profile fits this investment
• Getting a hard push from an advisor or social media influencer to invest in these bonds
• Will be better off with a corporate bond debt mutual fund instead of a direct bond offering