REC LTD
AAA
AAA
ISIN : INE020B07HS2
Yield(%)
5.2
Unit Price
1000
Coupon(%)
8.71
Expiry Date
09/14/2028
Quantum
20000
IP
24thSep of every year
Rating
AAA
REC Limited, formerly known as Rural Electrification Corporation Limited, is a premier financial institution in India dedicated to financing and promoting rural electrification and energy infrastructure projects. Established in 1969 under the Companies Act, REC operates under the administrative control of the Ministry of Power, Government of India. REC's primary mission is to facilitate the development and modernization of the power sector, with a particular focus on rural areas. It provides financial assistance and support to power utilities, state governments, and private sector entities for various initiatives, including the electrification of villages, construction of transmission and distribution infrastructure, and implementation of renewable energy projects. As a key player in India's power sector, REC offers a range of financial products and services, including loans, debt financing, and advisory services tailored to the needs of its clients. The institution also plays a crucial role in promoting sustainable and inclusive development by supporting initiatives that enhance energy access, promote renewable energy adoption, and improve the efficiency of power distribution systems. With its extensive experience, expertise, and nationwide presence, REC has been instrumental in driving rural electrification and power sector development in India. Through strategic investments and partnerships, REC continues to contribute significantly to the country's energy security, economic growth, and social welfare, ultimately improving the quality of life for millions of people in rural and underserved areas.
3rd largest housing finance company
1 million+ happy customers
Rated AAA by CRISIL, ICRA and CARE
Rated AAA by Brickwork Ratings
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₹1000/Unit
Purchase Price
Face Value₹1000
Market Value₹1170
Principle Amount
(Market value * no. of bonds)Accrued interest till 09/14/2028
Interest earned this yearPlatform Fee
₹115Total Investment₹1343.5
What are bonds?
- Bonds are debt investment instruments with a fixed rate of return and maturity period. Bonds are issued by entities to raise capital in the form of loans that are used to achieve business objectives like starting a new project or scaling existing businesses.
- For every bond issue, fixed interest payments (coupons) are made regularly on pre-specified dates.The principal loan amount (face value per unit of bond) is paid back on the pre-specified maturity date.
What is the coupon rate?
- The coupon rate is the interest rate paid on a bond by its Issuer for the term of the instrument. Once set at the issuance date, abond's coupon rate remains unchanged and holders of the bond receive fixed interest payments at a predetermined frequency.
- For example: A bond is issued with face value of INR 1,000 and coupon rate of 12%. The bondholder will get 12% of INR 1000 = INR 120 annually. If the coupon is paid on a monthly basis, the bondholder will get INR 10 per month.
What is Yield to Maturity?
- Yield to maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures. Yield to maturity is considered a long-term bond yield but is expressed as an annual rate. It takes into account all the interest payments and repayment of the original principal.
What is the difference between coupon rate and Yield to Maturity (YTM)?
- The difference between coupon rate and yield arises because the market price of a bond is different from the face value. Since coupon payments are calculated on the face value, the coupon rate is different from the yield.
- The relation between price, coupon rate, and yield is given below:
- If coupon rate > YTM, the bond will sell above its par value (Premium).
- If coupon rate < YTM, the bond will sell below par value (Discount).
- If coupon rate = YTM, the bond will sell at the face value.
What is accrued interest?
- Accrued interest is the amount of bond interest that has accumulated since the last time a bond interest payment was made. The interest has been earned by the bondholder, but because coupons are only paid at set intervals, the investor has not gained the money yet.
- If the present bondholder sells his bond, he must get the interest until the date of the sale.For example, assume you receive an INR 1,000 coupon on the 1st of every month. On the 15th of the month, you decide to sell the bond. Since you held the bond for 15 days, the equivalent coupon amount, in this case, INR 500, is earned by you. Hence, when you sell the bond, you would sell it at INR 500 over the clean price of the bond.
What is the difference between the clean price and dirty price of the bond?
- The clean price is the price of a coupon bond not including any accrued interest. The clean price is typically the quoted price on financial news sites.
- Dirty price is the price of a bond that includes accrued interest between coupon payments.
How is the Investment amount of a bond calculated?
- The investment amount is the sum of the market price of the bond "Clean Price" and accrued interest.
Why does bond price fluctuate?
- There are majorly 2 factors due to which bond prices fluctuate, which are covered below:
- Interest rates: Bond price is inversely related to the prevailing interest rates. The interest rates affect bond prices by influencing the discount rate. With the increase in interest rates, the discount rates also increase, pushing the price of debt instruments down.
- Credit risk of the Issuer : Bonds are rated by independent credit rating agencies such as CRISIL, ICRA, and Fitch to rank a bond's risk for default. If a credit rating agency lowers a particular bond's rating to reflect more risk,the bond's yield must increase to compensate investors for higher risk and the price should drop.
What is credit quality?
- Credit quality is an indicator of the ability of the Issuer to pay back his obligation.The credit quality of fixed income securities is usually assessed by independent rating agencies such as CRISIL, ICRA, and Fitch.
- For example, India Ratings (Fitch) follows an 11-symbol based system for credit ratings ranging from AAA (Highest credit quality) to D (Default). Some of the symbols and related expectations are discussed below:
FAQs
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