Putting and calling a bond: who can end it early, and how

12 rights, 2 owners

A put option is the holder's right to make the issuer buy the bond back before maturity. A call option is the issuer's right to repay the bond before maturity. Neither is an obligation: the owner of the right may use it or leave it.

A put is the holder's exit and a call is the issuer's. Whichever one a bond carries, it exists only if the bond's own offer document says so.

2What SEBI fixes for every bond

Regulation 15 of SEBI's Non-Convertible Securities Regulations, 2021 sets the frame for listed debentures.¹ Check the current consolidated text on sebi.gov.in before relying on any detail below, since rules get amended.

• One of the 2 rights. An issuer shall either keep a right to recall the securities (call) or give a right to redeem them early (put), to all investors or only to retail investors. A retail investor here is a holder with securities of no more than ₹2 lakh aggregate face value.
• Written down in advance. The right is used under the terms of issue. The offer document must state the date it starts, the exercise period and the redemption amount, including any premium or discount.
• At least 3 working days to exercise. The exercise period cannot be shorter.
• All or part. Either side may use the right on all of its securities or only some. If an issuer calls only part of an issue, it must do so proportionately.
• Not in the first year. No such right can be used before 1 year from the date of issue.
• 21 days of notice. The issuer must send a notice to every eligible holder and to the debenture trustee at least 21 days before the date from which the right can be used. Holders with an email address registered with the company or a depository get it by email; the rest get a paper copy. A copy goes to the stock exchanges at the same time.
• A penalty for delay. If the issuer pays late, it owes interest at 15% a year for the delay.
• Tidying up. After the exercise, the issuer reports to the exchanges what was redeemed, informs the trustee, and tells the depositories to extinguish the redeemed securities.

SEBI fixes the minimums: 1 year before first use, 3 working days to exercise, 21 days of notice. The bond's own terms fix everything else.

3What differs from bond to bond

Because the bond's terms fill in the rest, 2 bonds that both carry a "put" can behave nothing alike. These 8 things are set by each bond and are the first things to read.

Read 8 things in the bond's own document: who may use the right, when, at what price, where the notice goes, how long the window is, who else must agree, how much notice is given, and what happens to the holders who stay.

4How a put is carried out, step by step

The order of steps is much the same everywhere. The addresses, forms and dates come from the notice for the bond in question.

1. The issuer announces the window. At least 21 days before the right starts, the issuer or its trustee sends a notice to every holder and to the trustee, and files it with the exchanges. It states the record date, the exercise period, the put date and the price. A holder with no email registered at the depository gets a paper notice, so a current email on the demat account is the first thing to keep in order.
2. The holder decides, on all or part. A holder may put every bond held or only some.
3. The holder gives written notice inside the window. It goes where the notice says: to the trustee, to a named email at the issuer, or to the issuer's office. A notice sent after the window closes is normally rejected, and many notices say so in plain words.
4. The holder keeps the bonds through the record date. Payment goes only to holders who gave notice and still hold the bonds on the record date, as the depositories show it. Many notices say that a holder who sells before that date has the notice treated as invalid. Some terms go further and bar any sale or transfer of the bonds once notice is given. The amount payable is often confirmed only after the record date.
5. The issuer pays on the put date. Redemption comes with the interest due, credited to the bank account linked to the demat account. The issuer then reports the redemption to the exchanges and the trustee and asks the depositories to cancel the bonds.

A made up timeline. Take a bond with a put date of 15th May. The issuer's notice goes out on 1st Mar. The window runs from 6th Apr to 24th Apr. The record date is 30th Apr. A holder who emails notice on 20th Apr and holds the bonds through 30th Apr is paid on 15th May. A holder who sends notice on 25th Apr is a day late, and a holder who sells on 28th Apr loses the put even though the notice was on time.

When a trustee runs the put

In some bonds the holder never writes to the issuer. The trustee runs the process, and the clauses read as a chain:

1. The trustee tells all holders about the put, at least 21 days before the exercise period begins, and asks who intends to exercise.
2. A holder who wants to put tells the trustee. The trustee then tells every other holder, usually within a couple of business days, that a put has been proposed.
3. A holder who wants to join has a set number of business days from that notice to confirm. A holder who declines or stays silent is out of the put and keeps the bonds.
4. The trustee gives the issuer a written notice at least 21 days before the exercise period starts. This notice is often stated to be irrevocable.
5. The issuer redeems only the bonds of the exercising holders, at the put price, with other amounts due on them, on the put date.

In a trustee process the holder's real deadline falls well before the exercise window. If the trustee must give the issuer 21 days of notice, and the joining round takes another week or so, a holder who wants other holders to have time to join must act roughly a month before the window opens. Work back from the put date, not forward from the window.

Some terms also add a size test, such as a minimum of ₹5 crore of face value, alone or as a group. A holder with a small position can then act only by joining a group through the trustee.

A put needs 4 things from the holder: a notice sent inside the window to the right address, the bonds kept through the record date, a decision on how many to put, and a current email on the demat account to receive the notice in the first place.

5What a put is worth

The price in the terms sets the floor. A put at par means the holder gets face value back plus the interest due. A put at a discount means the holder accepts a known loss to leave.

A made up example. A bond of ₹10,000 face pays an 11% coupon. The holder has owned it for 1 year and can put it at 95% of face. The holder receives about ₹1,100 of coupons across the year and ₹9,500 back at the put, a gain of about ₹600, or 6% on ₹10,000 (our calculation, simple interest, no reinvestment). If the same bond trades in the market at ₹9,900, selling there gives ₹9,900 and is better than the put by ₹400 per bond. The put is worth using when the market price is below the put price, or when there is no buyer at all.

The other side of a put. A put is a claim on the issuer's cash. If many holders use it on the same date, the issuer must find the money at once. Before relying on a put, compare the amount that could fall due in the window with the issuer's cash and loan repayments. A put is only as good as the issuer's ability to pay on the put date.

A put at par is a real floor. A put at a discount is a choice to accept a loss, and it beats the market only when the market is weak. Either way, it is paid by the same issuer whose bond you are trying to leave.

6How a call reaches a holder

A call needs no action from the holder. The issuer follows these steps:

1. Decides. The board approves the call. A bank, a finance company or an insurer may also need its regulator's approval, or must meet capital conditions first.
2. Gives notice. It writes to the trustee and to every eligible holder, and files the notice with the exchanges, at least 21 days before the date from which the call can be used, or longer if the bond's terms say so.
3. Fixes a record date. This is usually about 15 days before the redemption date.
4. Pays everyone on the record date. Principal comes with accrued interest, credited to the bank account linked to the demat account.
5. Reports. It informs the exchanges and the trustee and asks the depositories to extinguish the bonds.

A holder who sells before the record date is not repaid, because the buyer is. Notices often say the issuer will not be responsible for claims on bonds sold or transferred after the record date.

A call is a choice. An issuer that could call may decide not to, and may tell holders so in a notice. Until a call notice is filed, the bond runs to its stated maturity.

What a call does to the price

A bond that can be called at ₹10,000 seldom trades far above ₹10,000, because buyers know the cap. A made up example: a 12% bond of ₹10,000 face with 3 years left, bought at ₹10,300. If it runs to maturity, the buyer collects about ₹3,600 of coupons and loses ₹300 of price: about ₹3,300 on ₹10,300 over 3 years, or about 10.7% a year in simple terms. If it is called after 1 year, the buyer collects ₹1,200 and loses the same ₹300: about ₹900 on ₹10,300, or about 8.7% for that 1 year (our calculation, simple interest). The earlier the call, the more of the premium paid is lost. The "yield to call" on a screen shows this case. Plan around the lower of the yield to call and the yield to maturity.

In a call the holder acts on nothing: the notice sets the record date, and whoever holds on that date is paid. Any approval the issuer needs comes first. A call can also be skipped.

7Doing it in practice

The notices we have read ask for a written notice, not an order in a trading app. A broker or platform may not have a "put" button at all, so the holder usually does the work by email or post, using the details in the issuer's notice.

To put a bond: what you actually do

1. Find the notice. Look in the email account registered on your demat account, then in your spam folder. If nothing came, search the issuer's name on the BSE or NSE announcements page, or the bond's ISIN, and open the filing about the put. Paper notices go to the address on your demat account.
2. Note 4 dates. Copy down the start and end of the exercise window, the record date and the put date. Put all 4 in your calendar with a reminder 3 days before the window ends.
3. Confirm what you hold. Open your demat holding statement and note the ISIN and the number of bonds. Decide how many to put, all or only some.
4. Find where the notice goes. The put notice names the address: the debenture trustee, an email at the issuer, or the issuer's office. Use that and nothing else. If the notice names a form, use that form.
5. Send a clear written notice inside the window. A plain email is often enough. It should carry:
   • your name as it appears on the demat account, your demat account number (DP ID and client ID) and your PAN
   • the bond's name and ISIN
   • the number of bonds you are putting
   • a sentence stating that you exercise the put option under the terms of the bond for the put date in the notice
   • your bank account details for payment, if the notice asks for them
   • a phone number and an email you read
   Send it early in the window, not on the last day. Ask in the email for an acknowledgement.
6. Keep proof. Save the sent email with its timestamp, any acknowledgement, and a screenshot or PDF of your holding statement. If you post anything, use a tracked service and keep the receipt.
7. Chase if you get no reply. If there is no acknowledgement in 2 working days, write again and call the number in the notice. Inside a window of 3 days, a missing reply is an emergency, not a courtesy.
8. Do not sell or move the bonds. Leave them in the same demat account untouched through the record date and until payment. Do not transfer them to another account.
9. Check the payment. On the put date or soon after, look for the credit in the bank account linked to your demat account, and check that the bonds have left your holding. Payment should include the interest due. If it is late or short, write to the issuer and the trustee with your proof. Late payment carries interest at 15% a year under Regulation 15.
10. Keep the records. Save the credit entry and the holding statement for your tax records, and note that the bonds are gone from your portfolio.

If a trustee runs the put, replace step 5 with a message to the trustee that states your intention and holding, and then watch your email for the trustee's notice to the other holders, since your own notice starts the clock for them.

For a call: what you do, which is little

A call asks nothing of the holder, but 5 small checks protect the money.

1. Read the notice when it comes. It states the record date, the redemption date, the price and the interest included. Compare these with the bond's terms.
2. Decide whether to hold through the record date. The holder on the record date is paid. If you want your money out sooner, you can sell in the market before the record date, usually at a price close to the call price. If you sell, the buyer collects the call money, not you.
3. Check the bank account linked to the demat account. Payment goes there. Make sure it is open and current, and update it with your depository participant before the record date if it is not.
4. Check the credit on the redemption date. Look for the amount in your bank account and the bonds disappearing from your holding. If nothing arrives within a few days, write to the issuer, its registrar and the trustee, whose names are in the notice, and quote the ISIN and your demat details.
5. Plan the reinvestment. The coupon you were earning ends on the call date. Decide in advance where the cash goes, so it does not sit idle, and save the credit entry for your tax records.

A put is paperwork you start: find the notice, calendar 4 dates, send a clear written notice early, keep proof, hold the bonds through the record date and check the payment. A call is paperwork you only monitor: hold through the record date, keep the bank link current, and confirm the credit.

8Before you rely on either right

• Read the term sheet rows. A SEBI format Key Information Document lists "Put Date", "Put Price", "Call Date", "Call Price", "Put Notification Time" and "Call Notification Time". A row marked "Not Applicable" means the right does not exist. A row that points to a sub-section further on means the detail sits there.
• Do not rely on one data screen. Exchange data fields and platform listings can lag the document or disagree with it. The offer document is the authority.
• Put the dates in a calendar. Work back from the put date: record date, the issuer's or trustee's notice, the window and, in a trustee process, the joining round.
• Check the email on the demat account. Regulation 15 sends the notice by email to holders who registered one with the company or a depository, and by post to the rest.
• Check the price against the market. A put at a discount is worth using only when the bond trades below that price, or does not trade.
• Check the issuer's ability to pay. A put hands the cash problem to the issuer. Look at how much could fall due in the window against its cash and repayments.
• Watch the exchange announcements. Calls, record dates and put windows are filed on BSE and NSE under the issuer's name, and each filing carries the notice to holders.
• Ask the trustee or the issuer when unsure. The notice names who to contact. A question asked inside the window is cheap, and one asked after it is too late.

What this guide cannot tell youRegulation 15 sets the notice and the minimums but not the form a holder fills in, and depositories do not run one standard "put" instruction. Each issuer's notice names its own address and method, so the notice for the specific bond is the authority. The regulation's text is from a consolidated copy amended to 18th Sep 2024; check the current version for later changes. Whether every rule applies in full to private placements is a point for a lawyer.