Investing in Public Sector Undertaking (PSU) bonds has long been considered a secure and reliable option for investors seeking stable returns in India. These bonds are issued by government-backed entities, offering a blend of safety and attractive yields. As we look towards 2025, several PSU bonds stand out as noteworthy investment opportunities. Below is a curated PSU bonds list for investors aiming to diversify their portfolios with stable and rewarding instruments.
Top PSU Bonds to Consider in 2025
- REC Limited
- Coupon Rate: 7.99%
- Call Date: February 2035
- Credit Rating: CARE AAA
- Bond Type: Perpetual Bond
- Yield: 7.9536%
REC Limited, formerly Rural Electrification Corporation Limited, is a leading public infrastructure finance company in India’s power sector. The perpetual bond offers a high coupon rate with a call option in 2035, making it suitable for long-term investors seeking steady income.
- Rural Electrification Corporation Limited
- Coupon Rate: 7.56%
- Maturity Date: June 2026
- Credit Rating: CARE AAA
- Bond Type: Unsecured Regular Bond/Debenture
- Yield: 7.48%
This bond from REC Limited offers a competitive coupon rate with a medium-term maturity, appealing to investors looking for a balance between yield and investment horizon.
- Hindustan Petroleum Corporation Limited
- Coupon Rate: 7.74%
- Maturity Date: March 2028
- Credit Rating: ICRA AAA
- Bond Type: Unsecured Regular Bond/Debenture
- Yield: 7.22%
HPCL, a major player in the oil and gas sector, offers this bond with a favourable coupon rate and a maturity in 2028, making it an attractive option for those seeking medium to long-term investments.
- National Highways Authority of India (NHAI)
- Coupon Rate: 7.05%
- Maturity Date: September 2041
- Credit Rating: CARE AAA
- Bond Type: Secured Regular Bond/Debenture
- Yield: 7.25%
NHAI, responsible for the development and maintenance of national highways, offers a long-term bond suitable for investors seeking stable returns over an extended period.
- National Highways Authority of India (NHAI)
- Coupon Rate: 7.39%
- Maturity Date: Jan 2026
- Credit Rating: CARE AAA
- Bond Type: Tax-free Bond
- Yield: 5.5%
NHAI also offers a tax-free bond suitable for investors in high-tax bracket.
Benefits of Investing in PSU Bonds
- High Credit Quality: PSU bonds typically carry high credit ratings due to government backing, reducing default risk.
- Stable Returns: They offer fixed interest payments, providing a predictable income stream.
- Liquidity: Many PSU bonds are listed on stock exchanges, allowing for easy entry and exit.
- Tax Benefits: Certain PSU bonds come with tax incentives, enhancing post-tax returns.
Considerations Before Investing
- Interest Rate Risk: Bond prices are inversely related to interest rate movements; rising rates can lead to capital depreciation.
- Liquidity Risk: Some bonds may have lower trading volumes, making them harder to sell at desired prices.
- Credit Risk: Although minimal, there is a possibility of credit rating downgrades affecting bond values.
How to Invest in PSU Bonds
Investors can invest in bonds through various channels:
- Primary Market: Participate in public issues when PSUs raise funds.
- Secondary Market: Purchase existing bonds through stock exchanges or over-the-counter markets.
- Online Platforms: Utilize digital platforms like IndiaBonds to explore and invest in a wide range of PSU bonds.
Conclusion
PSU bonds remain a cornerstone for conservative investors seeking safety, regular income and portfolio diversification. The PSU bonds list provided above highlights some of the top options to consider in 2025.
