BondX is a fixed-income investment opportunity structured in the form of an SDI, which is backed by receivables of multiple Bonds. These SDIs are rated by a credit rating agency. Investors/Subscribers are provided with expected payouts in the form of monthly interest payments, and stagerred principal repayments. For risk mitigation, all cash flows are managed by a SEBI-registered trustee to ring-fence the receivables

The BondX is a regulated and rated instrument, managed by an independent, SEBI-registered trustee. The returns in the BondX originate from a pool of Bonds receivables, which are individually secured by the Issuer by placing a collateral of a minimum 1.1x of the outstanding principal.

ROI and IRR are complementary metrics and the main difference between the two is the time value of money. ROI gives you the total return of an investment but doesn’t take into consideration the time value of money. For example, INR 1,000 received today is more valuable than INR 1,000 received after 3 months. IRR calculations take into consideration when the INR 1,000 was received, while ROI does not.

IRR hence not only represents the amount of money earned but also how fast it was earned.

Only the monthly interest payout is expected to be taxed at the marginal tax rate of the individual investor; no tax should be payable on the principal repayment. Appreciation (if any) of the price of the SDI, in case of sale prior to the full tenure, is expected to be considered as capital gain and taxed accordingly. Please do not consider this as tax advice. We urge you to speak with your independent tax advisor.

The investment amount is the sum of the face value of each SDI  (“Clean Price”) and accrued interest. 

Accrued interest is the amount of interest due on the SDI that has accumulated since the last time an interest payment was made. The interest has been earned by the existing holder, but because interest is only paid at set intervals the investor has not received the money yet. If the present holder sells his SDI, he should be entitled to get the interest until the date of the sale.
 

For example, assume you receive INR 1,000 as interest on the 30th of every month. On the 15th of the month, you decide to sell the SDI. Since you held the SDI for 15 days, an equivalent coupon amount, in this case INR 500 is earned by you but not yet received. Hence, when you sell the SDI, the INR 500 in accrued interest must be added to the sale price to fairly compensate you. 

The clean price is the price of a SDI not including any accrued interest. The clean price is typically calculated as the adjusted face value of the instrument closer to the nearest payout date, ceteris paribus. Dirty price is the price of a SDI that includes accrued interest between payout dates.

• Yes, similar to Bonds, there could be 2 major factors due to which the prices fluctuate:
   
• Interest rates: Price of fixed-income instruments is inversely related to the prevailing interest rates.  With an increase in interest rates, the buyer expects more returns and accordingly, the price of the instruments goes down
   
• Credit risk: SDIs are rated by independent credit rating agencies such as CRISIL, which rank the risk for default. If a credit rating agency lowers or raises a particular SDI’s rating to reflect a change in risk, the returns must increase or decrease respectively to compensate the buyer.
   
• For example, the typical symbols and related expectations are discussed below:
   
• A1 - Instruments with this rating are considered to have a very strong degree of safety regarding the timely payment of financial obligations. Such instruments carry the lowest credit risk.
   
• A2 - Instruments with this rating are considered to have a strong degree of safety regarding the timely payment of financial obligations. Such instruments carry low credit risk.
   
• A3 - Instruments with this rating are considered to have a moderate degree of safety regarding the timely payment of financial obligations. Such instruments carry higher credit risk as compared to instruments rated in the two higher categories.
   
• A4 - Instruments with this rating are considered to have a minimal degree of safety regarding the timely payment of financial obligations. Such instruments carry very high credit risk and are susceptible to default.
   
• D - Instruments with this rating are in default or are expected to be in default on maturity.
• Modifier {"+" (plus)} can be used with the rating symbols for the categories A1 to A4. The modifiers reflect the comparative standing within the category.

Timely Interest and Timely Principal (TITP): Under this structure, both interest and principal payouts are promised at specified intervals (monthly/quarterly, etc.). If there is any shortfall in the promised payouts, credit enhancement available in the transaction can be utilized.
 

Ultimate Interest and Ultimate Principal (UIUP): Under this structure, there is a distinction between promised payouts, and expected payouts. While the interest and/or principal payouts could be expected at specified intervals, they are promised only on the maturity date. This implies that credit enhancement can be utilized only if the principal and/or interest is not fully paid out on/before the maturity date of the transaction.
 

Timely Interest and Ultimate Principal (TIUP): Under this structure, while the interest payouts are promised at specified intervals, the principal payouts are only expected at specified intervals. This implies that credit enhancement can be utilized if there is any shortfall in promised interest payouts, and also if the principal is not fully paid out on/before the maturity date of the transaction.

Yes, SEBI has mandated KYC requirements for the purchase of the SDIs to prevent money laundering activities

No. It is mandated by SEBI to transfer funds from the bank account in the name of the applicant.