Wint Wealth | Retailing bonds

May 10, 2024

The more capital one can invest, the more investment opportunities become available. This means institutional and sophisticated investors can diversify their portfolios better. On the other hand, retail investors need more diversification. Especially in India.

My theory is that Indians invest in what they believe are safe investments – fixed deposits (FD), gold and real estate – because they don’t have social security. Not enough Indians have insurance either. Only when they feel secure do they wade into stocks. But they miss a step in between – corporate bonds. For that matter, not many know how to include government bonds in their portfolio either.

As co-founder and CEO Ajinkya Kulkarni explains in this episode of From Scratch, he realised that he could lend his own money to his father’s business to get a higher yield than FDs. Despite this potential, however, investors can’t invest in high-yielding corporate bonds easily. People don’t understand how bonds work, how to pick good bonds, or where to invest in them. And they usually don’t have the capital to invest in them in the first place.

These are hard problems to solve. That’s why the folks at Wint Wealth decided to take it on.

Wint started as a fixed interest platform, ‘GrowFix’ in 2020, with a seed round of USD 2 million and 6 co-founders – Ajinkya Kulkarni, Abhik Patel as chief product officer, Shashank Chimaladari as chief technology officer, Anshul Gupta as chief investment officer, Vinay Dubey as chief marketing officer, and Sruthi Sivakumar as chief design officer.

In the episode, Gupta, the CIO, offers a primer on the Indian investors and the fixed interest market as background to their hard problem. He explains that retail investors don’t really understand the government bond market, let alone the private bonds segment, where NBFCs are the main issuers. In his view, credit ratings could be more efficient as retail investors, today, struggle to understand the disconnect between credit ratings and yields in a market driven by institutional investors. He also explains the different types of bonds – senior, subordinated and perpetual – in terms of who is paid first in case of a default. But retail investors don’t understand the difference between a default event and the loss suffered. So there is a lot of education to be done.

The next part of the hard problem is research. While high net worth individuals get research from private wealth managers, retail investors don’t have this access. There is friction in the execution and reporting too.

These are the issues that 15-odd fintech platforms for fixed interest set out to solve. They’ve come to be known as Online Bond Platform Providers after coming under regulatory purview in 2022. OBPPs tackle these issues by providing education, information and research on credit ratings and yields, access and execution, and portfolio management and reporting.

Kulkarni introduces Wint’s platform – a discovery and execution platform for Indian fixed interest investing for retail investors. At the time of the recording, the platform offered a ‘curated’ list and basket of bonds. It has since expanded to offer a curated list of fixed deposits too. Gupta maintained that this sort of curation is different from what a bond mutual fund offers. The founders also explain that Wint’s balance sheet (which had grown as a result of its USD 20m funding) allows it to work with issuers to originate bonds that are then available exclusively to its investors.

When asked about its customer acquisition strategy, Kulkarni shared how he used his own LinkedIn network to start. The platform now does a lot of content marketing, including its own YouTube channel.

The conversation included a discussion on covered bonds since it had received a lot of media attention.
Since the recording, Wint has acquired a NBFC and completed a restructuring. However, currently, covered bonds as a structure does not exist because of RBI discontinuing it.

This segment seems to be evolving quickly, with the regulator allowing the lowering of investment amount and easing of payments, which will boost the retail market for bonds even further. This will add to the already increased activity since the launch of these platforms.

Consulting Producer, Zerodha

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