Earnnest.me Review – Best Real Estate Platform ?

The world of investment has significantly changed since the COVID-19 pandemic waned away. The pandemic has taught investors the need for diversification, which is probably why there’s a new interest in fixed-income alternatives like Non-Convertible Debentures or NCDs, especially among average retail investors who were earlier restricted to traditional investments like stocks, mutual funds, and … Read more

RACE Energy (Race Vault) Review- 26% Asset Leasing

What is RACE Energy? RACE is a deep-tech battery swapping company, building advanced swappable batteries and smart swapping network for use in across all segments of EVs. Founded in 2019 in Hyderabad by Arun and Gautham, RACE has a grand vision of powering the world’s largest battery swapping network. The founders have the DNA of … Read more

High Yield Bonds in India – Best Platforms

In the Indian financial landscape, high-yield bonds play a significant role in offering investors the potential for enhanced returns. These bonds, carry higher risk but also promise higher yields. In this guide, we will explore the nuances of high-yield bonds in the Indian context, focusing on BBB bonds, real estate bonds, and venture debt, which are gaining traction among investors seeking alternative avenues for portfolio diversification and higher income.

Understanding High-Yield Bonds in India

High-yield bonds in India are debt instruments issued by companies or governments with credit ratings below investment grade. This typically includes bonds rated below BBB by credit rating agencies such as CRISIL, ICRA, or CARE. These bonds offer higher yields to compensate investors for the increased credit risk associated with the issuing entities.

Characteristics of High-Yield Bonds in India:

  1. BBB Bonds: BBB bonds represent a significant segment of high-yield bonds in India. These bonds are issued by companies with lower credit ratings, implying a higher default risk compared to investment-grade bonds. Despite the slightly higher risk, BBB bonds offer attractive yields, making them popular among income-seeking investors. The expected Yield from BBB is 12-13.5%
  2. Real Estate Bonds: Real estate bonds are debt securities issued by real estate developers to raise capital for property development projects. These bonds typically offer higher yields than traditional corporate bonds, reflecting the inherent risks associated with the real estate sector, including market cyclicality, regulatory changes, and project-specific risks. Expected Yield from Real Estate Bonds is 15-18%
  3. Venture Debt: Venture debt is a form of financing provided to early-stage or growth-stage startups, often in conjunction with equity financing. Venture debt offers higher yields compared to traditional corporate bonds, compensating investors for the higher risk associated with startups. Venture debt providers may include specialized funds, HNI,banks, or non-banking financial companies (NBFCs) with expertise in evaluating startup business models and risk factors. Expected Yield from Venture Debt is 15-20%

Benefits of High-Yield Bonds in India

  1. Enhanced Yield: High-yield bonds offer investors the potential for higher income compared to investment-grade bonds, making them attractive.
  2. Portfolio Diversification: Including high-yield bonds in a diversified investment portfolio can help enhance overall portfolio returns and reduce correlation with other asset classes such as stocks and traditional bonds.
  3. Exposure to Alternative Sectors: Real estate bonds and venture debt provide investors with exposure to alternative sectors such as real estate and startups, offering diversification benefits and potential for capital appreciation.
  4. Counter-Cyclical Characteristics: High-yield bonds in India have historically exhibited counter-cyclical characteristics, performing well during economic recoveries and outperforming other fixed-income assets during periods of economic expansion.

Risks of High-Yield Bonds in India

  1. Default Risk: High-yield bonds are susceptible to default risk, particularly BBB bonds issued by companies with weaker credit profiles. Investors should carefully assess the creditworthiness of issuers and conduct thorough due diligence to mitigate default risk.
  2. Sector-Specific Risks: Real estate bonds and venture debt are exposed to sector-specific risks, including market cyclicality, regulatory changes, and project-specific factors. Investors should consider the unique risks associated with these sectors before investing.
  3. Liquidity Risk: High-yield bonds in India may have lower liquidity compared to investment-grade bonds, making it challenging to buy or sell them at desired prices, particularly during market downturns or periods of heightened volatility.

Strategies for Investing in High-Yield Bonds in India

  1. Active Management: Active management strategies involve conducting fundamental analysis, credit research, and issuer-specific due diligence to identify attractive high-yield opportunities and manage default risk effectively.
  2. Diversification: Diversifying across a broad range of high-yield bonds, including BBB bonds, real estate bonds, and venture debt, can help mitigate individual issuer risk and enhance portfolio stability.
  3. Duration Management: Managing portfolio duration and interest rate sensitivity can help investors navigate interest rate risk by adjusting the average maturity of high-yield bonds to align with market conditions and investment objectives.
  4. Credit Quality Assessment: Conducting thorough credit analysis and due diligence on high-yield issuers is essential for assessing default risk and selecting bonds with attractive risk-adjusted returns.
  5. Sector Allocation: Allocating investments across various sectors, including real estate and startups, can help spread risk and capitalize on sector-specific opportunities while avoiding concentration in high-risk sectors.

Does High Yield Mean More Risk Too?

Having seen the different types of bonds, investors are often faced with the dilemma of risk if they chase high yield bonds. Its very understandable that the potential of higher return for
high-yield assets is accompanied by the chances of greater default risk than the corporate and government debt securities. However, that’s not the case to be understood in a universal sense. For instance, corporate bonds are provided with the rating of AAA to default by credit rating agencies. Here, AAA is considered as the highest rating. Companies tend to invest in AAA-rated bonds due to the regulatory and internal mandates that come with them. Hence, such bonds tend to have higher demand which results in lower yield. AAA-rated bonds come with a very high degree of creditworthiness. This is because the issuers succeed in meeting the financial commitments easily along with a lower risk of default. On the other hand, bonds that come with a slightly lower rating offer high yields due to lower demands. Further, these have a lower risk factor.

This goes without saying that investors prefer to invest in high-rated instruments. Further, regulators do not allow investments into instruments with a below A rating. Hence, the demand for such instruments drops automatically despite the low-risk factor.

Best Platform to Buy High Yield Bonds In India

Below is the list of some of the platforms that we use to buy Yield Bonds

Altifi

Altifi is part of Northern Arc Group and has some of the top High Yield Bonds. The platform boasts of zero default to date. They list only those bonds that have been reviewed by their team. Their experience in credit writing gives more credibility to the bonds available in the platform. Microfinance companies is the forte of this platform

Gripinvest

Grip Invest offers multiple High Yield Bonds that are popular in the market. They also provided Securitized debt instruments that can provide a yield as high as 16% to the investors. Read about Securitized debt instruments here

Altgraaf

Altgraaf is a platform that specializes in Alternative Investments. Apart from other products it also lists Real Estate NCDs and Venture debt that can offer upto 18% IRR to investors.

Wint wealth

Wint Wealth is a bond-only platform. They list a couple of bonds every month.  Unlike other platforms, they work with the issuer and create customized payment schedules for the bonds. The focus is on due diligence and optimum repayment structure to reduce risk

Tapinvest

Tapinvest provides access to unlisted bonds. These are bonds of generally Fintech companies or Startups and have yields ranging from 13-17%.

Incred Money

incred

The platform is backed by Incred Group. Apart from listing high-yield bonds, the platform also lists unique products like Market Linked Debentures that are linked to Nifty Performance and can also provide principal protection.

Conclusion

High-yield bonds, including BBB bonds, real estate bonds, and venture debt, offer investors the potential for enhanced returns in the Indian market. By understanding the characteristics, benefits, and risks of high-yield bonds and employing sound investment strategies, investors can effectively harness the potential of these alternative fixed-income instruments to enhance portfolio returns while managing risk. However, it’s crucial to conduct thorough due diligence before investing in high-yield bonds or any other asset class, considering individual investment objectives, risk tolerance, and time horizon.

If you wish to explore alternative investments beyond high yield bonds go through the below list

Alternative Investment List

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Alternative Investment Portfolio Performance – Feb 2024

This month equity and crypto assets have been on steroids. This has been an investors’ market where they have enjoyed higher yields on debt investments and equity gains. Generally, a higher rate is associated with lower equity performance but this has not happened till now.

On the Alternative Investment front, we can see a lot of existing platforms working on their structure to make them more palatable to regulatory bodies. This has been the repercussion of SEBI’s notice to Growpital. For instance, Now Sustvest would be issuing Listed debt instead of the LLP model.

We will try to cover these changes and also interview the founders on the efforts being made from their end to make it a win-win situation for all the stakeholders.

Telegram channel for the Latest Alternative Investment News

Alternative Investments Defaults and Delays

We have created a table to make it easy for everyone to track the latest status of ongoing delays and delays on various platforms and the current updates around them.

Name DealStatusUpdate
GrowpitalPlatform FreezeSEBI Freeze- SEBI require more information
- Webinar by Growpital
AltgraafArzoo Partial Repayment- - Litigation Process against Arzoo initiated
- New funding to be raised
TapinvestMelorra Asset LeasingEarly Asset Buyback- Melorra and Exampur Case filed
- Partial repayment for Exampur expected this month
GripinvestBigspoonPartial Repayment- Grip has filed case against company
- 25% asset recovery pending.
kredxDairy PowerRepayment- 93% principal repaid
KlubTagzDelay- Legal action pursued
- 3cr fundraise going on

Currently below are the key updates on the delays from last time

  • Growpital SEBI Order
  • Altgraaf Delay
  • Klub Tagz Delay

Growpital SEBI Order

Growpital has submitted all the documents SEBI had requested them. They conducted an AMA session on 2nd Feb. They reiterated the same thing that SEBI has still not provided a final verdict and due diligence is going on.

I hope if we could salvage the principal portion it would be a big win as there are multiple questions that only time can reveal

  1. How long with SEBI take to unfreeze the accounts?
  2. Will Growpital get a green signal on having no misappropriation of funds?

At this point I feel we are better off if they diverted the funds in hard assets and SEBI freeze can help to recover that because if they were doing the agriculture business this freeze will be really detrimental for the business operations and it will be hard to get back our principal.

Altgraaf Arzoo Delay

Below are the timelines of Altgraaf communication

  • The Arzoo Invoice Discounting transaction faced delays on the AltGraaf platform. AltGraaf is in communication with all relevant parties. It is anticipated that the transaction will be finalized by December 20, 2023, inclusive of additional interest.
  • On December 20, investors were notified that Arzooo would make an immediate payment of 25% of the principal, with the remaining principal and interest to follow at a later date.
  • Subsequently, on December 26, investors received correspondence indicating that 14.4% of the outstanding balance would be disbursed by January 12, 2024, bringing the total distributed principal to 35.8%.
  • However, on January 12, 2024, investors were informed that the expected payment release was delayed due to complications between Arzooo and the bank. No definite timeline was provided, and legal proceedings were mentioned.
  • On February 9, 2024, it was communicated that Arzoo had received $3 million from existing investors, prompting the immediate distribution of funds to AltGraaf. AltGraaf subsequently dispersed 10.4% to existing investors, with an additional 6.2% scheduled for distribution by the following Friday. Following these repayments, investors would have received 37.4% of the principal amount.

Further updates from AltGraaf will be shared with investors as they become available.

Klub Tagz Delay

This month I faced my first delay in my Klub investment since the time I had started investing them. They have communicated the money would be paid in 2 tranches in the upcoming months.

Alternative Investment Portfolio Updates

This month I added a new platform for angel investing- Inflection Point Ventures. It is important to understand that though Angel investing can be very lucrative it comes with its own risk and should be a part of the portfolio for sophisticated and large investors only as it requires a lot of diversification and ticket is higher than conventional investments.

We also invested in Long Duration Funds that I will also pledge to get the trading margin as it is considered as cash equivalent by Exchange. Investors can target double-digit returns with minimum credit risk through these. To understand in detail go through our article 

Lending Investment

The focus has been on short-term high-yield bonds of companies with good balance sheets. Some of the names we have invested in this month are:

  • Samunnati Finance -13.5%
  • Trucap -13.5%
  • Krazybee -12.7%
  • Lendingkart – 12.9%
  • Akara Capital-13.3%

Incred MLD is another decent option for people looking to participate in equity.

incred

 

Platform Returns RD NPA Total NPA
Grip Invest 10-12%(Post-Tax) 0.00% 0.30%
Klubworks 20%+ 0.00% 0.90%
WintWealth 10-11.5% 0.00% 0.00%
Jiraaf (altgraaf) 12-15% 0.00% 0.25%
Sustvest 10-11% 0.00% 0.00%
Afinue(Upcide) 13%(Post Tax) 0.00% 0.00%
Pyse 10-11%(Post-Tax) 0.00% 0.00%
Growpital SEBI Pause SEBI Pause N.A.
Leafround(Tapinvest) 15-18% 0.00% 0.00%
Altifi 12.5% 0.00% 0.00%
Betterinvest 16%-18% 0.00% 0.00%
Incred Money 11.0% 0% 0%
Randomdimes Youtube

 

Short Term Investments

Platform Returns RD NPA Investor NPA
Liquiloans (Liquid Fund Substitute) 9% 0% 0%
Tradecred 11.50% 0% 0%
Lendbox (Per Annum Liquid Fund Substitute) 11.50% 0% 0%
Lendzpartners 13.00% 0% 0%
Faircent 11% 0% 0%
KredX 12% 0% 0.75%
13  Karat (new) 13% 0% 0%
  • Lendbox Per Annum returns are as per expectations with seamless liquidity. Current yield 11.69%
  • Have taken out money most capital from Liquiloans as yields are too low!
  • Invested in Log9 on Tapinvest and Wonderchef, Amazon on Kredx

We would be focussing on only a few names in invoice discounting as do not want to take risks of new enterprises or vendors.

Crypto Investing

The Bitcoin ETF approval has started a fresh rally in the crypto market. A record $520 million stampeded into BlackRock Inc.’s Bitcoin ETF in a single day. Year to date, Bitcoin is up more than 45%, making it a top performer among any kind of asset even after surging last year.

Investing after the crash has been a good move. We feel the rally might sustain and 2024 will continue to be a good year. At these levels, we are not adding new capital but shuffling the portfolio, booking profit in some and replacing them with others that have not moved much.

You can buy Hardware Wallets on Etherbit

P2P Investment

Current allocation:

  • India P2P – 50%
  • I2IFunding- 20%
  • Finzy-10%
  • Faircent Pool Loan -15%
  • 13 Karat – 5%
Platform Loans Selected Yield NPA
I2IFunding(Restarted) Urban Clap Loans, education loans, Group loans 13.5% 4.8%
IndiaP2P Only Women Borrower Loans, Branch-based p2p lending 17% <1%
FINZY(Paused) Prime Borrowers, High Salary, A category 13% 3.7%
12 Club (paused) Only Minimum amount 12% 0%
  • I Have completely stopped 12Club now as the yields are not attractive anymore.
  • There was delay in repayment for some IndiaP2P investors due to collection delay in south India because of floods.
  • I2Ifunding (get 50% off) has again started doing more volume. I have deployed some capital. I have been using the platform since 2017 and is the only platform that was able to get investors positive returns after Covid! Will be doing a 5 year review soon and try to have an interview with the founder.
  • The systematic investment plan loan on Faircent ( Only SIP Loan) is doing fine. Not adding more capital at the moment.

Equity Market

PreIPO Stocks

We have added a new unlisted stock – Vikram Solar to our portfolio. The stock has a similar business model as Waree but is significantly cheaper than it. Vikram Solar Limited is an Indian company based in Kolkata. It is one of the largest solar module manufacturers in India (by capacity), with 3.5 GW module manufacturing capacity annually, and the second-largest solar energy company in India by revenue. The company’s primary business focus is manufacturing solar PV modules, and also carrying out engineering procurement and construction services and operation and maintenance of solar power plants. We have been able to source the stock at less than 200 Rs which is lower than other online platforms

The major risks associated with this stock are

  1. High Debt
  2. Inconsistent profitability

Listed Stocks

The broad market has been in continuous bull mode with almost all sectors giving excellent returns. US markets have also been doing extremely well. The only market that has underperformed is China however it would be a high-risk investment bet to allocate large capital there. We would be adding some allocation there with a 5-year view. Nvidia is now worth the same as the whole Chinese stock market as defined by Hong Kong-listed H-shares.

The MSCI India Index trades at a 157% premium over the China gauge on valuations based on forward earnings estimates, just 3 percentage points short of the record reached in October 2022, according to data compiled by Bloomberg.

china valuation

 

Algo Trading

Our Algo and Manual Option trading gave a 2% return in Feb. The high premium due to the upcoming elections has been beneficial to us as risk-reward has become favorable in option selling however market behaviour has become more erratic with multiple intraday spikes hence risk management is a key to making sustainable profits.

Investors who are just starting algo trading can explore tradetron as it requires a minimum learning curve and marketplace to copy traders.

It is evident from returns that’s hard to predict the distribution of returns as that is the function of market behavior. On an annualized basis 20-30% is a decent target.

Investors with INR 30+ Lakh deployable capital can reach out to inquire on more sophisticated algos

Other Alternative Investment Assets  and Platform Updates

ALTDRX – My current investment in ALT DRX has been deployed in prime land assets. I am looking at a window of 18-24 months to target 15%+ IRR in the investments. They are planning to launch a couple of more properties this month.

Leasify Investment – Leasify generally has low volume as they are bootstrapped hence I do not expect to see many deals on the platform for a couple of months. The current deals are doing fine.

Wisex- My investment in Wisex has been performing as expected. It is more than 2 years since I made my first investment in Times Square Property Mumbai through Wisex. I expect an exit this year in my investment

They have a fractional Real Estate deal in Pune that has a decent yield

Wisex

Flagged Alternative Investment Platforms

Have added “My Cloud Particle” to the list of  Flagged”  platforms. The platform has not provided much information on the deals, or the risk and mentions guaranteed returns. There is hardly any information on the business model or team members’ background data.

If there are other platforms that you feel might be too risky to invest , please do comment and we will explore and add them to the list

 

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