Denomination Of Issuance And Trading Of Non-Convertible Securities

The circular issued by SEBI on July 3, 2024, amends Chapter V of the Master Circular No. SEBI/HO/DDHS/PoD1/P/CIR/2024/54 dated May 22, 2024, concerning the denomination of issuance and trading of non-convertible securities. The amendments aim to enhance retail investor participation and liquidity in the corporate bond market by lowering the minimum face value requirements for private placement of debt securities and non-convertible redeemable preference shares:

  1. Reduction in Face Value: The minimum face value for private placement of debt securities and non-convertible redeemable preference shares is reduced to Rs. 10,000/- from Rs. 1,00,000/-, subject to the appointment of at least one Merchant Banker and compliance with specified conditions regarding interest/dividend payments, fixed maturity, and absence of structured obligations.
  2. Documentation and Due Diligence: Regarding existing Shelf Placement Memorandum (SPM) or General Information Document (GID) valid as of the effective date of the circular, issuers are permitted to raise funds using Tranche Placement Memorandum (TPM) or Key Information Document (KID) with a face value of Rs. 10,000/-. This allowance is contingent upon the appointment of at least one Merchant Banker to conduct due diligence for such issuances. Issuers must issue a necessary addendum to the SPM or GID, as applicable, to reflect these new provisions.
  3. Trading Conditions: Listed debt securities and non-convertible redeemable preference shares traded on stock exchanges or OTC platforms must maintain a trading lot equal to their face value.
  4. Permissible Credit Enhancements: Various credit enhancements are allowed for issuing these securities, including guaranteed bonds, partially guaranteed bonds, standby letter of credit (SBLC) backed securities, debt backed by pledge of shares or assets, guaranteed pooled bond issuance (PBI), obligor/co-obligor structures, cross default guarantee structures, and debt backed by payment waterfall/escrow or DSRA (Debt Service Reserve Account), with guarantees from third parties. Credit Rating Agencies must verify the unconditional and legally enforceable nature of such enhancements
  5. Applicability: The circular applies to all future issuances of debt securities and non-convertible redeemable preference shares on a private placement basis proposed for listing from the date of its issuance

This regulatory framework is designed to foster a more inclusive and liquid corporate bond market while ensuring compliance with investor protection and market development objectives outlined by SEBI.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Media Coverage

About Dhaval Vussonji

Ask a Question

© 2023. Dhaval Vussonji & Associates.

Expertise

DVA on LinkedIn

Stay in touch and learn with us. 

Ask a question

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Legal Disclaimer

User Acknowledgement

By proceeding further and clicking on the “AGREE” button herein below, I acknowledge that I of my own accord wish to know more about Dhaval Vussonji & Associates for my own information and use. I further acknowledge that there has been no solicitation, invitation or inducement of any sort whatsoever from Dhaval Vussonji & Associates or any of its members to create an Attorney-Client relationship through this knowledgesite. I further acknowledge having read and understood the Disclaimer below.

Disclaimer

This knowledgesite (www.dvassociates.co.in) is a resource for informational purposes only and is intended, but not promised or guaranteed, to be correct, complete, and up-to-date. Dhaval Vussonji & Associates (DVA) does not warrant that the information contained on this knowledgesite is accurate or complete, and hereby disclaims any and all liability to any person for any loss or damage caused by errors or omissions, whether such errors or omissions result from negligence, accident or any other cause.

DVA further assumes no liability for the interpretation and/or use of the information contained on this knowledgesite, nor does it offer a warranty of any kind, either expressed or implied. The owner of this knowledgesite does not intend links from this site to other internet knowledgesites to be referrals to, endorsements of, or affiliations with the linked entities. DVA is not responsible for, and makes no representations or warranties about, the contents of Web sites to which links may be provided from this Web site.

This knowledgesite is not intended to be a source of advertising or solicitation and the contents of the knowledgesite should not be construed as legal advice. The reader should not consider this information to be an invitation for a lawyer-client relationship and should not rely on information provided herein and should always seek the advice of competent counsel licensed to practice in the relevant country/state. Transmission, receipt or use of this knowledgesite does not constitute or create a lawyer-client relationship. No recipients of content from this knowledgesite should act, or refrain from acting, based upon any or all of the contents of this site.

Furthermore, the owner of this knowledgesite does not wish to represent anyone desiring representation based solely upon viewing this knowledgesite or in a country/state where this knowledgesite fails to comply with all laws and ethical rules of that state. Finally, the reader is warned that the use of Internet e-mail for confidential or sensitive information is susceptible to risks of lack of confidentiality associated with sending email over the Internet.

Accept