Debt securities

Sebi decides to merge the rules on debt securities

NEW DELHI: To ease the compliance burden on listed entities, Sebi on Tuesday approved a proposal to merge the listing rules for debt securities and non-convertible redeemable preferred shares into one regulation.

Under the new framework, issuers other than REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) not listed on a stock exchange, which have been in existence for less than 3 years, have been facilitated to operate the bond market under certain conditions. conditions, Sebi said in a statement. statement at the end of its board meeting.

This condition includes that the issuance of their debt securities is done solely on the basis of a private placement; the issue is made on the EBP platform regardless of the size of the issue, and the issue is open for subscription only to qualified institutional buyers (QIB).

“This will allow special purpose vehicles created for specific infrastructure purposes / NBFC / Listed REITs / Listed InvITs and other companies that offer to list debt securities only on a private placement basis but have not with a three-year history, to list their debt securities issued on the basis of a private placement, ”said Sebi.

He further stated that all other requirements under the proposed rules and operating stipulations of the e-book mechanism provider or EBP mechanism will continue to apply to these issuers.

The Board of Directors approved the proposals to merge the ILDS rules (issuance and listing of debt securities) and the NCRPS rules (redeemable non-convertible preferred shares) into a single regulation which will be called the Sebi regulation (issuance and listing of debt securities). non-convertible securities).

In addition, risk factor identification parameters have been introduced as part of the new rules to help issuers disclose relevant risk factors on risks intrinsic to the issuer as well as to the instrument, other risk factors, which may have an impact on the emission, among others.

The requirement to have a minimum rating of AA- for the public issue of NCRPS has been removed as is the case for a public issue of debt securities.

The three-year minimum term requirement for public issuance of NCRPS has been removed, giving issuers the flexibility to structure their issuance according to their resource needs and to raise funds through a NCRPS broadcast.

This is also in line with the current requirement for debt securities.

In order to allow issuers to raise funds quickly without filing a separate prospectus each time, the restriction of no more than four issues of debt securities per year through a single shelf prospectus has been removed.

The call and put option has been introduced for debt securities issued on the basis of a private placement. This will provide greater flexibility to issuers and investors of debt securities and NCRPS as well.

“In addition, the exercise period for call and put options has been reduced from 24 months to 12 months in order to provide greater flexibility, both for issuers and investors,” Sebi said.

Issuers who remedied the default on interest / dividend / redemption payments to raise funds using non-convertible securities were allowed to file a shelf prospectus after such resolution of the default.

This is conditional on the issuers having remedied the default at least 30 days before the filing of the draft shelf prospectus.

In order to encourage public issuance of debt securities, the current provision that the minimum size of Rs 100 crore has been removed, Sebi said.

The Electronic Book Provider (EBP) platform has been made compulsory for the issuance of qualifying securities on the basis of a private placement proposed to be listed for an amount of Rs 100 crore or more during a financial year , which will improve price discovery and transparency.

Sebi stated that the provision to create a charge on the assets and properties of the issuer has been harmonized with the Companies Act, thus allowing the issuer to have the option of creating a charge on its properties or assets. , shares or any interest therein, of the issuer or its subsidiaries or its holding companies or associated companies.

The move will provide greater flexibility to issuers for the creation of charges.

The shortened prospectus requirement has been simplified to around 10 pages by over 50 pages, in order to improve readability for the investor.

In the event that an issuer wishes to renew debt securities, electronic voting has been introduced in addition to postal voting to allow issuers to transparently obtain a vote for the adoption of the resolution. It will also encourage more investor participation in the vote.


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