What numbers should I check before buying a bond?

1"How to analyse the issuing company?"

In November 2021 a reader was looking at a secured bond from a lending company, paying 10.5% a year, sold on a bond app. The rating was fine. The brochure was glossy. And the reader still did not know what to check:

Any bond experts in the house? Can someone give pointers on how to analyse the offer document and the issuing company?

anon75004691, TradingQnA, 28th Nov 2021

The thread has been read more than 15,000 times, and nobody answered that post. Another reader, looking at a different bond, put the puzzle in one line:

if it is secured , and A+ rating ; why do they pay 10% returns ?

HSL, TradingQnA, 20th May 2022

Chapter 10 showed how to read a bond's 2 pieces of paper: the offer document and the rating report. This chapter reads the numbers inside them. When you buy a bond, you are a lender. A bank lending to a company would ask a handful of questions, and each one has a ratio or two that answers it. You can ask the same questions, using numbers the company is already required to publish.

Buying a bond makes you a lender. Ask what a lender asks, and let a few ratios answer.

2Where the ratios live

You do not have to calculate most of these yourself. 3 places hand them to you:

• The company's results. SEBI requires every company with listed bonds to publish a list of ratios with its quarterly and yearly results: debt to equity, debt service coverage, interest service coverage, net worth, profit, current ratio and more. They sit in a small table, usually a page or two after the profit and loss statement, in the company's filing on NSE or BSE. Lending companies add their own: capital adequacy, bad loans and liquidity.
• The security cover certificate. For secured bonds, the company and its trustee publish how many rupees of assets back every rupee of bonds. Since the quarter ended 31st Dec 2025 this certificate comes every quarter, within 60 days.
• The rating report. Every rating rationale ends with a "key financial indicators" table: a few years of revenue, profit, debt and the agency's own versions of the main ratios (chapter 10).

RememberSEBI lists which ratios to publish but not how to calculate them, and rating agencies adjust the numbers their own way. Compare a ratio with the same company's past, or with a similar company using the same source, not across different sources.

The results table, the security cover certificate and the rating report's indicator table carry almost every ratio you need.

35 questions a lender asks

Think of lending ₹1 lakh to a neighbour's shop. Before you hand it over, you would want to know 5 things:

1. Is the shop already borrowing too much?
2. Does it earn enough to pay the interest?
3. Will it have cash on the day it owes me?
4. If it lends money itself, are its own borrowers paying it back?
5. If things go wrong, what can I claim?

1. Borrowing too much: debt to equity. Debt divided by the owners' own money (net worth). A ratio of 0.8 means the company owes ₹80 for every ₹100 its owners have put in. The higher it goes, the less cushion there is before losses reach the lenders. Rating agencies call this gearing. A cousin, total outside liabilities to net worth, counts everything the company owes, not just loans.

2. Paying the interest: interest coverage. Profit before interest and tax divided by interest. A ratio of 5 means the company earns 5 times its interest bill. Below 2, a bad year can make the interest hard to pay. The debt service coverage ratio (DSCR) goes further: it compares cash earned with interest plus the loan repayments due, because repayments need cash too.

3. Cash on the day: liquidity. For an ordinary company, the current ratio: what it will receive within a year divided by what it must pay within a year. Above 1 is the starting point. For lending companies there are better measures, below.

4. Its own borrowers: bad loans. Only for lenders. A loan counts as a non performing asset (NPA) once a payment is more than 90 days overdue. Gross NPA is bad loans as a share of all loans; net NPA is what is left after the money the lender has already set aside to cover them. The share set aside is the provision coverage.

5. What you can claim: security cover. The value of the assets pledged for the bond divided by the bonds they back. SEBI requires listed secured bonds to have at least 100% cover, enough for principal and interest. An unsecured bond has none to claim (chapter 10).

Debt to equity, interest coverage, liquidity, bad loans and security cover answer the 5 questions: how much it owes, whether it can pay the interest, whether it will have cash, whether its own loans are good, and what backs your bond.

4Lending companies are different

Most company bonds sold to retail investors come from lending companies: gold loan lenders, home loan lenders, vehicle and small business lenders. For them, debt is not a warning sign. It is the raw material. A lender borrows money to lend money, so a debt to equity of 3 or 5 is normal, and a reader asking which ratios matter for banks shows how easy it is to use the wrong ones:

Apart from known financial ratios - GP, NP, GPM, NPM, CASA, D/E, D/A are there any banking specific ratios...

Amey1, TradingQnA, 12th Oct 2026

For a lender, 4 numbers matter most, and RBI sets minimums for most of them:

• Capital adequacy ratio (CRAR). The lender's own money as a share of its loans, weighted by how risky each loan is. It is the shock absorber. RBI requires most finance companies and housing finance companies to keep at least 15%, with at least 10% in the strongest form of capital; gold loan lenders need 12% in that strongest form. Banks need at least 11.5%, including a buffer.
• Gross and net NPA, as above, and how they move from quarter to quarter.
• Liquidity coverage ratio (LCR). Cash and easy to sell assets divided by the money that could leave in a stressed month. Larger lenders must keep it at 100% or more.
• The mismatch between money due in and money due out. RBI limits how much more a lender can owe than it will receive in the next 30 days: 10% in the first 7 days, 10% in the next 7, and 20% in days 15 to 30. Lenders publish these figures in their annual reports.

One more thing to watch is refinancing. A reader put it plainly in 2022:

Most of these companies, need to get fresh issue out to redeem the earlier ones. The problem will occur when the fresh issue is not subscribed

neha1101, TradingQnA, 8th Jan 2022

For lenders, look at capital adequacy (at least 15% for most), gross and net bad loans and their trend, liquidity coverage, and short term mismatches. A high debt to equity is normal for a lender.

53 real companies, side by side

Here are the published ratios of 3 companies with listed bonds, for the quarter to 30th Jun 2026, taken from their own results filings. They are examples of how to read the numbers, not views on the bonds.

The 2 lenders look almost the same. Both hold about 21% capital against a 15% minimum, both report bad loans near 1.2%, and both have far more liquidity than RBI asks for. Yet Bajaj Finance's 10 year secured bond issued in July 2026 carries a 7.79% coupon, while Kosamattam's public issue in August 2026 offered about 8.3% to 10.5%, according to issue summaries. The ratios do not explain the gap. What does is everything the ratios leave out: Bajaj Finance's owners have put in about 80 times as much money, it lends across India and across many kinds of loans, and it can borrow from banks and markets easily. A small, regional lender pays more because if things go wrong, it has fewer places to turn. That is the answer to HSL's question: the extra yield pays for size, spread and access to money, not for anything a single ratio shows.

Trends beat snapshots. Kosamattam's cost of bad loans rose to ₹10.4 crore in the quarter, from ₹1.1 crore a year earlier. One quarter is not a trend, but it is the kind of number worth checking again next quarter.

Read the cover certificate, not just the number. Kosamattam's secured bonds have cover of 1.22 times, against the 1.10 times it promised. But the same assets also back about ₹2,964 crore of bank loans, which share them equally with the bonds. Its subordinated debt and unsecured bonds are marked "NA": no cover at all.

The same bond can show 2 covers. Torrent Power's trustee certified cover of 5.18 times for the quarter to 30th Sep 2025, valuing its power plants at market value. Torrent's own results for the same date showed 2.33 times. Both can be right; they value the assets differently. Always check which value a cover figure uses, and note that the valuation behind it is only required once in 3 years.

Ratios move with decisions. Torrent's debt to equity rose from 0.57 in March 2026 to 0.78 in June, after it raised ₹3,800 crore of bonds and bought another power company. CRISIL said a sustained rise in its debt to earnings above 3.5 to 4 times could cut its rating. When a company makes a big purchase, expect its ratios to move, and read the rating report to see where the agency draws the line.

Similar ratios do not mean similar risk: size, spread and access to funding explain much of the extra yield. Watch the trend, read the cover certificate in full, and check how assets are valued.

6What counts as strong or weak

Rating agencies do not publish a pass mark, but ICRA publishes the ranges it treats as relatively strong and relatively weak for companies outside finance. For construction companies, for example:

For lenders' bad loans, ICRA treats loans more than 90 days overdue, including those written off in the past year, of under 2% as strong for retail lenders and over 6.9% as weak; for housing finance companies, under 1.5% and over 5.5%.

Use agency ranges as a rough map, not a pass mark: interest cover below 2, debt service cover near 1, or debt above 5 times profit are signs to read the rating report closely.

7When the ratios looked fine

On 16th Aug 2018, ICRA described IL&FS's numbers as of 31st Mar 2018. Its borrowing was 3.04 times its net worth, or 2.30 times on the regulator's own measure, against a legal limit of 2.5 times. It reported "nil gross and net NPAs". Its return on net worth was about 11%. Within weeks it began missing payments, and by September 2018 its bonds were rated D (chapter 13's case files tell the rest).

The ratios were not lying. They described the year that had ended. What they did not show was that ₹9,000 crore of money owed to it was stuck in delayed claims, that it had promised to repay the debts of its group companies, and that it was waiting on fresh money from its shareholders to meet what it owed. Those were in the rating report's words, not in its table of numbers.

A clean ratio table is a picture of last year. Read the words around it: delayed payments, guarantees for group companies, and how soon the debt falls due.

8Where ratios mislead

• They look backward. Results come weeks after the quarter ends. ICRA says that judging by the latest ratios alone "may cause a point-in-time analysis bias"; it uses about 5 years of history and 3 of forecasts.
• No standard formulas. SEBI names the ratios but does not define them, so 2 companies' "debt to equity" may count different things. Torrent's, for example, counts guarantees as debt.
• Write offs shrink bad loans. A loan written off leaves the bad loan figure. ICRA adds back the past year's write offs when it judges asset quality; you can ask the same question of any falling NPA.
• 2 rulebooks for bad loans. Lenders report bad loans under RBI's 90 day rule and under accounting standards ("Stage 3"), which can differ. Their annual report must show both.
• Old valuations. Assets behind security cover need a fresh valuation only once in 3 years.
• Not an audit. CRISIL says it "does not perform a forensic analysis of financial statements". Ratios are only as honest as the accounts behind them.

Ratios look backward, follow no single formula, can be flattered by write offs and old valuations, and rest on accounts nobody has re-audited for you. Use them to ask better questions, not to end the thinking.

9A 10 minute ratio check

1. Open the latest results on NSE or BSE and find the ratio table.
2. Is it a lender? Check capital adequacy (at least 15% for most), gross and net NPA, and liquidity coverage. If not, check debt to equity, interest coverage and debt service coverage.
3. Compare with a year ago, using the same filing's earlier column.
4. Open the security cover certificate. Note the cover, what it is shared with, and whether your bond is listed as unsecured.
5. Open the rating report and read the key indicators table, then the words on liquidity and what could cut the rating (chapter 10).
6. Compare with one similar company from the same source.
7. Ask what the ratios leave out: size, how many kinds of loans or customers, and how easily it can borrow.

To anon75004691: start with the 5 questions in section 3. For a lending company, the capital ratio, bad loans, liquidity and security cover answer most of them, and every listed lender must publish them each quarter. Then read why the rating is what it is.

To HSL: a secured A rated lender pays 10% because it is small, regional and has fewer ways to raise money than an AAA lender, even when its ratios look similar. The extra yield pays you for that; whether it is enough is your call.

Results table, then the lender or company ratios, then the trend, the cover certificate, the rating report, a peer, and finally what the numbers cannot show.

Where to find today's figures