Government of Maharashtra Bonds: Features, Yield, Structure & Key Risks

Introduction

State government bonds play a significant role in India’s fixed-income market by enabling state governments to raise funds for infrastructure development, public services, and fiscal management. Among these, Government of Maharashtra bonds are issued by one of India’s largest state economies and are actively traded in the domestic bond market.

Searches for government of maharshtra bonds often reflect interest in understanding 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 Maharashtra bonds, covering their structure, yield to maturity (YTM), interest payments, and key risks, without offering investment advice.

What Are Government of Maharashtra Bonds

Government of Maharashtra bonds are state government debt securities issued to raise funds for budgetary requirements and long-term development projects. These bonds are part of a broader category commonly referred to as State Development Loans (SDLs).

When investors purchase these bonds, they are effectively lending money to the Government of Maharashtra in exchange for:

• Periodic interest payments

• Repayment of principal at maturity

These bonds are issued through public issuance and are typically listed, allowing secondary market trading.

Key Features of Government of Maharashtra Bonds

The key features of the Government of Maharashtra May’34 bond include:

• Issuer: Government of Maharashtra

• Bond Name: Government of Maharashtra May’34

• ISIN: IN2220220072

• Nature: Listed

• Bond Type: Senior secured, quasi-sovereign

• Mode of Issue: Public issuance

• Date of Issue: 25 May 2024

• Date of Maturity: 25 May 2034

• Tenure: Approximately 8 years 4 months

• Face Value: ₹100 per bond

• Coupon Rate: 7.72 percent (fixed)

• Interest Payout Frequency: Half-yearly

• Yield to Maturity (YTM): 6.90 percent

• Current Yield: 7.29 percent

• Clean Price: ₹105.85

• Dirty Price: ₹107.20

• Minimum Investment Amount: ₹107

• Credit Classification: Quasi-sovereign

These parameters define the contractual and financial characteristics of the bond.

Bond Structure and Quasi-Sovereign Nature

Government of Maharashtra bonds are classified as quasi-sovereign instruments. This means:

• The issuer is a state government, not a private entity

• The bonds are backed by the fiscal authority of the state

• They are not explicitly guaranteed by the central government, but benefit from state-level backing

The bonds carry senior status, implying priority over other unsecured obligations of the issuer. While the quasi-sovereign nature generally indicates lower credit risk compared to corporate bonds, it does not eliminate market-related risks.

Yield to Maturity (YTM) and Coupon Rate Explained

Coupon Rate

The coupon rate of the Government of Maharashtra May’34 bond is 7.72 percent, paid on the face value of ₹100. Interest is paid half-yearly, resulting in two scheduled interest payments each year until maturity.

Yield to Maturity (YTM)

The yield to maturity (YTM) of 6.90 percent represents the annualised return implied if the bond is held until maturity, assuming:

All interest payments are received as scheduled

The bond is purchased at the prevailing market price

Principal is repaid in full at maturity

YTM differs from the coupon rate because it factors in the purchase price, remaining tenure, and timing of cash flows. It is a calculated metric and not a guaranteed outcome.

Bond Price, Face Value, and ISIN

Face Value

The face value of the bond is ₹100, which:

Serves as the base for interest calculation

Represents the principal repaid at maturity

Bond Price

Clean Price: ₹105.85

Dirty Price: ₹107.20

The difference between clean and dirty price reflects accrued interest since the last coupon payment date.

ISIN

The bond is identified by ISIN IN2220220072, which enables:

Tracking of disclosures and trading activity

Identification of the specific bond series

Settlement through recognised depository systems

Issuer Overview: Government of Maharashtra

The Government of Maharashtra is one of India’s largest state governments by economic output. It raises funds through various channels, including taxes, grants, and borrowings such as state government bonds.

Bond issuances help the state:

• Finance infrastructure projects

• Manage fiscal deficits

• Refinance existing debt

The state’s ability to service its debt obligations is linked to revenue generation, fiscal discipline, and broader economic conditions.

Interest Payout and Maturity Profile

Interest Payout

• Interest is paid half-yearly

• Payments are based on the fixed coupon rate

• Cash flow dates are defined in advance

Maturity

• The bond matures on 25 May 2034

• Principal repayment is scheduled at maturity

The long tenure means the bond’s market price may be more sensitive to interest-rate movements over time.

Liquidity and Secondary Market Trading

Government of Maharashtra bonds are listed, allowing trading in the secondary market. However:

• Liquidity may vary across different state government bond series

• Older or off-the-run bonds may trade less frequently

• Prices can fluctuate based on interest rates and market conditions

• Listing improves transparency but does not guarantee ease of exit.

Risks Associated with Government of Maharashtra Bonds

Despite their quasi-sovereign status, these bonds carry certain risks:

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

• Liquidity Risk: Limited trading volumes may affect exit timing

• Inflation Risk: Fixed interest payments may lose real value over time

• Fiscal Risk: State-level fiscal pressures could influence market perception

These risks primarily affect market value rather than contractual payments.

Government of Maharashtra Bonds vs Other Government Bonds

Compared to central government bonds, state government bonds:

• Usually offer slightly higher yields

• Carry marginally higher credit risk

• May have lower liquidity

• Compared to corporate bonds, they:

• Typically carry lower credit risk

• Offer more predictable cash flows

• May provide lower yields than high-risk corporate instruments

Common Misconceptions About State Government Bonds

Some common misconceptions include:

• State government bonds are entirely risk-free

• Coupon rate equals actual return

• All government bonds are equally liquid

• Long-tenure bonds are unaffected by interest-rate changes

Understanding bond mechanics helps clarify these assumptions.

Conclusion

Government of Maharashtra bonds are long-term, quasi-sovereign debt instruments offering fixed interest payments and defined maturities. Their structure, yield to maturity, and state-level backing make them a distinct segment within India’s fixed-income market.

Understanding how YTM, coupon rates, pricing, and interest-rate sensitivity work provides clarity on how these bonds function, especially for long-tenure investments. Like all bonds, they remain subject to market and macroeconomic factors.

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.