Sebi will introduce ‘fast track’ public issuance for debt securities, reducing private placement debt securities’ face value to Rs 10,000. The goal is to deepen the bond market and simplify business.
To deepen the bond market, Sebi will introduce ‘fast track’ public issuance for debt securities and reduce the face value of private placement debt securities to Rs 10,000 from Rs 1 lakh. Including non-convertible debentures. Implementing the move would also ease business.
“The main intention of a fast track public issuance of debt securities is to facilitate frequent issuers with a consistent track record, to make public issues of debt securities with reduced time, cost and effort,” Sebi stated in its consultation. Sebi has “proposed to permit issuers to launch NCDs (non-convertible debentures) or NCRPS (non-convertible redeemable preference shares) with the face value of Rs 10,000” to increase non-institutional investor participation in corporate bonds.
Sebi advised the issuer to appoint a merchant banker to perform due diligence for privately placed NCDs and NCRPS and comply with private placement memorandum disclosure requirements. It added that such debt securities should have no credit enhancements or structured obligations and a simple structure.
Sebi reduced the face value to Rs 1 lakh from Rs 10 lakh in October 2022. The decision and mainstreaming of Online Bond Platforms (OBPs) have increased non-institutional bond market participation. The average was less than 1%, but non-institutional investors contributed 4% from July to September 2023. Sebi also noted that 1974 investors trade Rs 333 crore on OBPs.
In the case of Rs 10,000 Securitised Debt Instruments (SDIs), the regulator recommends a merchant banker. Instead of including audited financials for the last three years and Stub period financials in the offer document, Sebi suggested providing a QR code that opens the issuer’s website to the financials.
Details of Related Party Transactions (RPTs) and director remuneration must be specified up to the latest quarter for the current year. Sebi also recommends standardizing record dates 15 days before interest or redemption due dates. It has “proposed to consider, like equity issuance, an avenue to debt issuers to make the issuance of public issues on fast-track basis” .
Sebi suggested reducing the public comment period on a draft offer document for fast-track public issues to two working days. It also suggested listing fast-track public issues of debt securities at T+3 instead of T+6, to reduce debt securities fundraising timelines.
Electronic advertising should be allowed for issuers who choose this route, and newspaper advertising should be eliminated. Such issues should be open for one to 10 working days. Minimum subscription for banks and financial institutions is proposed to be eliminated when issuing through the route.
The retention limit should be limited to five times the base issue size to give issuers more fundraising flexibility. Sebi is accepting public comments on the proposals until December 30.
Conclusion
Sebi will introduce ‘fast track’ public issuance for debt securities, reducing the face value of private placement debt securities to Rs 10,000 from Rs 1 lakh. The goal is to deepen the bond market and simplify business. Sebi proposes allowing issuers to launch Rs 10,000 non-convertible debentures (NCDs) or NCRPS with a merchant banker for due diligence and disclosure.
After the face value was cut to Rs 1 lakh in October 2022, non-institutional investors increased their bond market participation. The regulator also recommends commissioning a merchant banker to issue Rs 10,000 Securitised Debt Instruments (SDIs).
To reduce public comments on draft offer documents for fast-track public issues, Sebi has proposed a T+3 listing timeline instead of T+6 for regular public issues. Issuers should be allowed to advertise electronically, and banks and financial institutions should no longer need minimum subscriptions. Retention should be limited to five times base issue size to increase fundraising flexibility.
