Grip Invest: Taking bonds to the masses

Grip Invest Technologies Pvt Ltd - (from left) Aashish Jindal, Co-founder & CPO; Nikhil Aggarwal, Founder & CEO; Vivek Gulati, Co-founder & COO. Grip is an investment platform that allows retail investors to diversify their portfolio with fixed income investment opportunities. Photo: Madhu Kapparath

Chitra Koushik’s father is an out-and-out fixed deposit saver. The retired post office employee would either save at his local bank or in savings certificates of his employer. He knew no other form of saving.

A little over a year ago, his daughter suggested that he try fixed income instruments with a higher payout that she found on Grip Invest, a platform which specialises in fixed income investing. While her father was sceptical, Koushik persisted and managed to persuade him to invest a total of Rs10 lakh in a product that invested in securitised lease payments for a cab aggregator.

According to her, the risk was compensated by the higher payout of 9.5 to 10 percent. While it is still early days in her investing journey, so far, the interest payments have continued uninterrupted, prompting her to continually up her parents’ investments. She is also aware of the risks involved and stays away from lower quality products that offer payouts of 13 to 14 percent. Koushik’s investments on Grip Invest total Rs50 lakh.

Over the last two years, the rise in interest rates globally and in India has resulted in an increase in Indians investing in higher yielding debt products. “There is a class of people who want higher yields without the volatility or risk associated with equity investments,” says Nikhil Aggarwal, Founder and CEO of Grip Invest. This can be done either through the mutual fund route, AIFs or debt investing platforms. Of these, AIFs are available only to high net worth individuals with a minimum investment size of Rs1 crore, mutual funds are accessible to anyone but offer few high-yielding products (the most popular are central and state government bond funds).

Debt investing platforms offer bonds (government, corporate) and have benefited on account of two regulatory changes in the last year. First, are Sebi (Securities and Exchange Board of India) rules regulating Online Bond Buying Platforms (OBPP). These stipulate the rights and obligations of both platforms and consumers. For instance, it was possible earlier that money was transferred to purchase a bond and the seller didn’t transfer the bond in the buyers demat account. With this regulation, there are formal mechanisms to enforce contracts.

In effect, Sebi is working on creating an exchange-driven marketplace for bonds. There are initial signs of this working for investors. On May 30, the Corporate Bond Reporting and Integrated Clearing System reported trades of Rs5 crore within the first hour of opening.

Second, is the minimum ticket sizes for investment in bonds. In May, this threshold was reduced to Rs10,000 from Rs100,000. This makes bonds of all types a truly retail product. Simply put, anyone with a demat account can complete the KYC requirements in a bond platform and have them transferred to their demat account. With lower amounts, platforms are trying their hand at innovative products that they say reduce risk while offering higher payouts. Kreditbee, which makes loans to customers, noticed the appetite among retail investors. “Grip was a subscriber to one of our non-convertible debenture transactions and we realised there was appetite for such debt among retail investors as well,” says Vivek Veda, CFO at Kreditbee.

Securitised Debt Instruments

While buying and selling plain vanilla company bonds is the preferred offering of bond platforms, Grip Invest has innovated and offered securitised debt instruments to retail investors. These put the receivables from a particular asset into a single instrument and sell units to retail investors.

Sample this: The investor buys units in a security that has purchased cars of ride-hailing company BluSmart. The money earned by running the cars as taxis is packaged into a security and paid out to investors. The leased cars (brand new Tata Tigor vehicles) are hypothecated to the investor and the rentals flow into an escrow account from which money is paid out. Called LeaseX, these securities have a BB+ rating. This product has been on the market since September 2023 and offers a 14 percent yield.

The growing crop of personal loans has resulted in companies looking to raise capital against those assets. Recently, NBFC Navi put their personal loans into a security and offered those receivables to investors at a 9.5 percent yield.

Savvy investors like Shobhit Gupta, a manager at EY, are happy to do the research themselves and buy these products. Gupta says he is primarily a fixed income investor and found securitised debt instruments while researching for high-yielding fixed income assets. He has put in Rs40 lakh in them and likes the fact that every month he gets an interest payout as well as some portion of the principal as a payout reducing risk.

One point to note is that while these instruments are rated and come with all the standard disclaimer warnings, there is always a chance of a default. Grip says it has taken care of this by asking for security in excess of the price of the units as well as a first loss default guarantee. As Koushik explains, in one of the securities she bought that had pooled leased assets, Bigspoon, a cloud kitchen company, defaulted. Grip continued to provide them with updates and no payment was missed on account of the security the company had already mortgaged.

What’s in it for the companies? The ability to raise money from individual investors at more attractive rates. Often companies in the early part of their lifecycle find it hard to convince banks to lend to them. At Everest Fleet, a mobility company, the option was to raise some money from banks and to get in expensive equity capital for the rest. Instead, says Shivang Unadkat, co-founder, Everest Fleet, the company connected with Grip and became a part of two securitised debt instruments that yield 14 to 15 percent. Now, as the company has matured and has a BBB rating, it should be able to raise money at lower rates, says Unadkat.

Also read: Bonds play: FII money into Indian debt market fizzling out again

Online fixed income platforms

Online fixed income platforms differ from mutual funds as they offer investors the opportunity to pick and choose specific instruments. Grip offers government and corporate bonds as well as securitised debt instruments with rating rationals as well as information documents on their website. (All bond buying platforms are required to display these.)

Grip set up in 2020 has raised Rs100 crore from a clutch of investors, including Venture Highway, Anicut Capital and AvantEdge. Aakanksha Sharma of Venture Highway, who invested Rs20 crore in Grip in multiple rounds, points to the increased sophistication on retail investors in understanding that a fixed income-like portfolio can also offer higher returns.

So far, Grip has done Rs250 crore (with an average ticket size of Rs2.5 lakhs) in securitised debt instruments and sees the market for both bonds and SDIs growing rapidly in the coming years. Aggarwal of Grip points to online brokers like Zerodha and RKSV (now Upstox), who in their infancy, took time to scale up. The tipping point came when online KYC was allowed and demat account additions zoomed. With the minimum investment in corporate bonds reduced to Rs10,000, Aggarwal believes that the tipping point has been reached here as well.
 
Going forward, Aggarwal sees Grip as a ‘manufacturer’ of fixed income products like SDIs and hopes they have enough supply to cater to the increased demand for retail investors. Expect some distribution tie-ups as well. How far could this market go? “The fixed deposit market is $2.5 trillion. Even if 10 percent of this moves to bonds and SDIs, that’s a total size of $250 billion (Rs25,00,000 lakh crore) to play for,” says Aggarwal.