- within Law Department Performance topic(s)
SEBI, vide circular dated July 3, 2024, has amended chapter V (Denomination of issuance and trading of non-convertible securities) of the SEBI master circular for issue and listing of non-convertible securities, securitised debt instruments, security receipts, municipal debt securities and commercial paper dated May 22, 2024. It is applicable to all issues of debt securities and non-convertible redeemable preference shares on private placement basis that are proposed to be listed from July 3, 2024. These amendments are made to lower the ticket size of debt securities that may encourage more non-institutional investors to participate in the corporate bond market which in turn may also enhance liquidity. These amendments include:
a new clause 1.3 is inserted permitting issuers to issue debt securities or non-convertible redeemable preference shares on a private placement basis at a face value of INR 10,000 (Indian Rupees ten thousand) subject to the certain conditions, such as:
- the issuer must appoint at least 1 (one) merchant banker;
- the debt security or non-convertible redeemable preference share must be interest/dividend bearing security paying coupon/dividend at regular intervals with a fixed maturity without any structured obligations;
- credit enhancements, such as guaranteed bonds, partially guaranteed bonds, standby letter of credit backed securities, will be permitted;
- regarding the credit enhancements mentioned above, credit rating agencies must verify the documentation related to the specified support considerations to ensure that the support is unconditional, legally enforceable and has a lower probability of default on a continuous basis till the time such instruments are outstanding;
- the issuer may raise funds through tranche placement memorandum or key information document at a face value at INR 10,000 (Indian Rupees ten thousand), for shelf placement memorandum or general information documents, provided at least 1 (one) merchant banker is appointed to carry out due diligence in respect of such issuances; and
- clause 2.3 pertaining to trading of non-convertible securities is modified to state that all trading lot of listed debt security issued on private placement basis and non-convertible redeemable preference share issued on private placement basis, which are traded on a stock exchange or over-the-counter will always be equal to the face value.
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