This refers to a debt that the borrower takes from the market for a specific objective. A bond can be issued in 2 ways, IPO or private placement. In both cases, various investors like retail, institutions, MFs and brokers participate.
An issuance is defined by an issue size which is the amount that it wants to raise with a green shoe which is the upper limit over and above the issue size.
In both IPO & Private placement, a draft term sheet is generated which has the key 5 factors of the bond-
1.Details of the offering: coupon, tenure, interest frequency, rating, nature of debt
2.What the company plans to do with the funds
3.Factors affecting investment decision
5.Information of stake holders
What is IPO- In an Initial Public Offering, a corporation and a dealer (agent) come to a preliminary agreement for the issuance and it is then distributed. To apply for an IPO, you can simply contact the dealer and download an application which you will need to fill out and send it back physically. On the day of the issuance, the amount is auto-debited from your bank account and the bonds are credited to your demat account. This process happens on a first-come-first serve basis.
What is Private Placement- In this process, the entire issue is sold to one or multiple institutions in a private arrangement. In many cases, private placements are announced after the issuance.
At Smest, in order to help retail participation in private placements, we have developed a mechanism where you can credit your Smest ICICI wallet with the amount in advance and apply for the private placement. The funds will be blocked but not deducted. One day after the issuance, the funds will be deducted from the wallet and the bonds will be credited to your demat account.