Government of Gujarat Bonds: Yield, Coupon, Maturity & Key Risks Explained

Introduction

State government bonds are an integral part of India’s fixed-income market, allowing state governments to raise funds for development, infrastructure, and fiscal management. Among these, Government of Gujarat bonds are frequently tracked due to Gujarat’s strong economic base and active participation in the State Development Loan (SDL) market.

Searches for government of gujarat bonds often reflect a desire to understand how these bonds work, how yields are calculated, and how they differ from central government or corporate bonds.

This article provides a purely educational explanation of Government of Gujarat bonds, covering their structure, yield, pricing, and risks, without offering any investment advice.

What Are Government of Gujarat Bonds

Government of Gujarat bonds are state government debt securities issued as part of State Development Loans. These bonds represent borrowing by the Government of Gujarat to fund expenditure such as infrastructure, social programs, and refinancing of existing liabilities.

When investors buy these bonds, they effectively lend money to the state government in return for:

• Periodic interest payments

• Repayment of principal at maturity

These bonds are issued via public issuance and are typically listed, enabling secondary market trading.

Key Features of Government of Gujarat Bonds

The key characteristics of the Government of Gujarat Dec’27 bond include:

• Issuer: Government of Gujarat

• Bond Name: Government of Gujarat Dec’27

• ISIN: IN1520170136

• Nature: Listed

• Bond Type: Senior, quasi-sovereign

• Mode of Issue: Public issuance

• Date of Issue: 13 December 2017

• Date of Maturity: 13 December 2027

• Remaining Tenure: Approximately 1 year 10 months

• Face Value: ₹100 per bond

• Coupon Rate: 7.75 percent (fixed)

• Interest Payout Frequency: Half-yearly

• Yield to Maturity (YTM): 5.80 percent

• Current Yield: 7.48 percent

• Clean Price: ₹103.56

• Dirty Price: ₹104.53

• Minimum Investment Amount: ₹105

• Credit Classification: Quasi-sovereign

These parameters define how the bond generates cash flows and how it is valued in the market.

Quasi-Sovereign Nature and Bond Structure

Government of Gujarat bonds are classified as quasi-sovereign instruments, meaning:

• The issuer is a state government

• The bonds are backed by the state’s fiscal authority

• There is no explicit central government guarantee

The bonds carry senior status, indicating priority over other unsecured obligations of the issuer. While quasi-sovereign bonds generally carry lower credit risk than corporate bonds, they are still subject to market-linked risks.

Coupon Rate vs Yield to Maturity (YTM)

Coupon Rate

The coupon rate of 7.75 percent is calculated on the face value of ₹100. Interest is paid twice a year, providing predictable cash flows over the bond’s remaining life.

Yield to Maturity (YTM)

The yield to maturity of 5.80 percent represents the annualised return implied if:

• The bond is purchased at the current market price

• All coupon payments are received as scheduled

• The bond is held until maturity

YTM differs from the coupon rate because it factors in the purchase price, time remaining to maturity, and timing of cash flows. It is a derived metric, not a guaranteed return.

Bond Price, Face Value, and ISIN

Face Value

The face value of ₹100:

• Forms the base for interest calculation

• Represents the principal repaid at maturity

Bond Price

• Clean Price: ₹103.56 (excluding accrued interest)

• Dirty Price: ₹104.53 (including accrued interest)

The difference reflects interest accrued since the last coupon payment.

ISIN

The bond is uniquely identified by ISIN IN1520170136, which is used for:

• Trading and settlement

• Tracking disclosures

• Identifying the specific bond series

Issuer Overview: Government of Gujarat

The Government of Gujarat is one of India’s major state governments with a diversified economy spanning manufacturing, ports, petrochemicals, agriculture, and services. Like other states, Gujarat raises funds through taxation, grants, and borrowings such as state government bonds.

Bond issuances help the state:

• Finance capital expenditure

• Support long-term development projects

• Manage fiscal requirements

The state’s ability to service debt depends on revenue generation, fiscal discipline, and economic growth.

Interest Payout Structure and Cash Flows

• Interest is paid half-yearly

• Coupon payments are fixed and pre-defined

• Principal repayment is scheduled at maturity

Because the bond has a defined maturity date, cash flows are predictable, subject to the issuer meeting its obligations.

Liquidity and Secondary Market Trading

Government of Gujarat bonds are listed, enabling secondary market trading. However:

• Liquidity varies across different state bond issues

• Trading volumes may be lower than benchmark central government bonds

• Exit price depends on prevailing interest rates and demand

Listing improves transparency but does not guarantee immediate liquidity.

Risks Associated with Government of Gujarat Bonds

Even with quasi-sovereign status, these bonds carry certain risks:

• Interest Rate Risk: Prices may decline if market interest rates rise

• Liquidity Risk: Limited trading volumes may affect exit timing

• Inflation Risk: Fixed interest may lose real purchasing power

• Market Risk: Bond prices fluctuate based on demand and macro conditions

These risks primarily affect market value rather than contractual payments if held to maturity.

Comparison With Other Government Bonds

Compared with central government bonds, state government bonds:

• Often offer slightly higher yields

• Carry marginally higher credit and liquidity risk

Compared with corporate bonds, they:

• Typically have lower credit risk

• Offer more predictable cash flows

• Provide lower yields than high-risk corporate instruments

Common Misconceptions About State Government Bonds

Common misunderstandings include:

• State government bonds are completely risk-free

• Coupon rate equals actual return

• All government bonds are highly liquid

• Short-tenure bonds are unaffected by rate changes

Understanding bond mechanics helps clarify these assumptions.

Conclusion

Government of Gujarat bonds are quasi-sovereign, fixed-income instruments offering defined interest payments and a clear maturity structure. Their yield, pricing, and risk profile reflect a combination of state-level fiscal factors and broader market conditions.

A clear understanding of YTM, coupon rate, bond pricing, and risks helps in interpreting how these bonds function within India’s debt market.

Disclaimer

This blog is intended solely for educational and informational purposes. The bonds and securities mentioned herein are illustrative examples and should not be construed as investment advice or personal recommendations. BondScanner does not provide personalized investment advice through this content.

Readers are advised to independently evaluate investment options and seek professional guidance before making financial decisions. Investments in bonds and other securities are subject to market risks, including the possible loss of principal. Please read all offer documents and risk disclosures carefully before investing.