Government of Madhya Pradesh Bonds: Structure, Rating, Yield & Key Risks

Introduction

State-linked bonds are an important part of India’s fixed-income ecosystem. These instruments allow state governments and their statutory financial institutions to raise long-term funds for development, industrial financing, and public welfare initiatives. Government of Madhya Pradesh bonds are often issued through state-owned financial corporations rather than directly by the state treasury.

Searches for government of madhya pradesh bonds typically reflect interest in understanding how these bonds are structured, how coupon payments work, and how risks differ from central government securities or corporate bonds.

This article provides a purely educational explanation of Government of Madhya Pradesh bonds, using bonds issued by the Madhya Pradesh Financial Corporation as a reference example.

What Are Government of Madhya Pradesh Bonds

Government of Madhya Pradesh bonds usually refer to debt instruments issued by state-owned or state-controlled entities, rather than bonds issued directly by the state government under State Development Loans.

Such bonds:

• Are issued to finance industrial and development activities

• Provide periodic interest payments

• Have defined or conditional maturity structures

• Are listed for secondary market trading

These bonds are legal obligations of the issuing entity, even though the issuer is state-owned.

Issuer Overview: Madhya Pradesh Financial Corporation

The Madhya Pradesh Financial Corporation (MPFC) is a state-level financial institution established to promote industrial development within Madhya Pradesh. It provides financial assistance to small, medium, and large enterprises across sectors.

Key issuer characteristics include:

• Ownership: Government of Madhya Pradesh

• Industry: Financial services and development finance

• Primary Role: Industrial and infrastructure financing

• Former Name: Madhya Bharat Financial Corporation

Bonds issued by MPFC are obligations of the corporation and not direct obligations of the state government.

Key Features of Government of Madhya Pradesh Bonds

The following details describe the MPFC bond (ISIN INE348F08043):

• Issuer: Madhya Pradesh Financial Corporation

• ISIN: INE348F08043

• Instrument Type: Non-Convertible Bond

• Issue Size: ₹100 crore

• Date of Issue: 19 November 2014

• Maturity Date: 19 November 2024

• Face Value: ₹1,00,000 per bond

• Coupon Rate: 9.20 percent (fixed)

• Interest Payment Frequency: Semi-annual

• Tax Treatment: Taxable

• Mode of Issue: Private placement

• Listing Status: Listed on BSE

• Security: Unsecured

• Seniority: Senior

• Credit Rating: D (CARE Ratings)

These features define the bond’s contractual and financial structure.

Bond Instrument Structure Explained

The bond is structured as a listed, unsecured, non-convertible debenture issued by a state financial corporation.

Key structural characteristics include:

• Unsecured nature: No specific collateral backing

• Senior ranking: Priority over subordinated obligations

• Fixed coupon: Interest rate remains constant

• Non-convertible: No equity conversion feature

• Partial redemption option: Redemption may occur by face value in parts

Despite state ownership, repayment depends entirely on the issuer’s financial capacity.

Coupon Rate, Yield, and Cash Flow Design

Coupon Rate

The bond carries a fixed coupon rate of 9.20 percent, calculated on the face value of ₹1,00,000. Interest is paid semi-annually, resulting in two interest payments per year.

Yield Perspective

The coupon rate reflects contractual interest payments. Market-linked yield may differ depending on:

• Purchase price in the secondary market

• Remaining time to maturity

• Prevailing interest-rate environment

Yield figures are indicative and not guaranteed.

Face Value, ISIN, and Listing Details

Face Value

• The face value of ₹1,00,000:

• Forms the base for interest calculation

• Represents the principal amount repayable

ISIN

The bond is identified by ISIN INE348F08043, which:

• Enables accurate identification of the bond series

• Facilitates trading and settlement

• Connects disclosures and rating information

Listing Status

The bond is listed on BSE, improving transparency and price discovery, though liquidity may vary.

Credit Rating and Its Implications

The bond has been assigned a D rating by CARE Ratings.

A D rating generally indicates:

• The issuer has experienced significant financial stress

• High probability of default or ongoing default status

• Very high credit risk

Credit ratings are opinions based on available information and may change over time. A low rating highlights the importance of understanding issuer-specific risks.

Interest Payment Schedule and Maturity Profile

• Interest Payments

• Paid semi-annually

• Fixed in amount based on the coupon rate

• Subject to issuer’s ability to meet obligations

Maturity

Scheduled maturity date: 19 November 2024

Principal repayment occurs at maturity or as per redemption structure

Some documentation references perpetual characteristics, which may relate to redemption structure rather than infinite maturity.

Liquidity and Secondary Market Trading

Although listed, liquidity in MPFC bonds may be limited due to:

• Issuer-specific credit profile

• Market participation levels

• Time remaining to maturity

Secondary market prices may fluctuate significantly based on credit perception and interest-rate conditions.

Risks Associated With Government of Madhya Pradesh Bonds

Key risks include:

• Credit Risk: High risk due to issuer financial stress

• Liquidity Risk: Limited secondary market trading

• Interest Rate Risk: Price sensitivity to rate changes

• Structural Risk: Unsecured nature of the bond

• Issuer-Specific Risk: Dependence on recovery and financial turnaround

State ownership does not eliminate these risks.

Comparison With Other State Government Bonds

Compared with State Development Loans (SDLs):

• MPFC bonds carry significantly higher credit risk

• SDLs are issued directly by the state government

• SDLs typically have lower yields and higher credit quality

Compared with other state PSU bonds:

• Credit profile varies widely

• Security and rating structures differ by issuer

Common Misconceptions

Common misconceptions include:

• All state-linked bonds are safe

• High coupon implies high safety

• Listing ensures liquidity

• State ownership guarantees repayment

Understanding issuer structure and credit rating helps clarify these assumptions.

Conclusion

Government of Madhya Pradesh bonds, particularly those issued by state financial corporations like MPFC, represent a specialised segment of India’s bond market. Their structure, coupon, credit rating, and risk profile differ significantly from both central government securities and higher-rated state bonds.

A clear understanding of issuer structure, credit rating, cash flow design, and risks is essential to interpret how these bonds function within the broader fixed-income landscape.

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.