Sebi mulls ‘fast track’ public issuance of debt securities to increase NIIs participation

To enhance ease of doing business for listed debt issuers, the Securities and Exchanges Board of India (Sebi) is mulling to introduce the concept of ‘fast track’ public issuance for debt securities and further reduce the face value of debt securities, including non-convertible debentures (NCDs) issued on a private placement basis to 10,000 from present 1 lakh so that more non-institutional investors can enter the market. The capital market regulator has invited public comments on these proposals until December 30, 2023. 

“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,” the consultation paper said.

The capital market regulator has “proposed to permit issuers to launch NCDs (non-convertible debentures) or NCRPS (non-convertible redeemable preference shares) with the face value of 10,000″ to increase the non-institutional investors in the corporate bond market. However, in such cases, the issuer shall appoint a merchant banker who shall carry out due diligence for issuance of such privately placed NCDs or NCRPS and disclosures in the private placement memorandum, the release said.

QR code of Audited Financials: 

Sebi suggested that instead of inserting the audited financials for the last three financial years and Stub period financials in the offer document, the same can be provided as a QR code scanning which opens the web link to the financials on the issuer’s website.

Digital statutory advertisement: 

The issuers opting for the fast-track public issue route may be allowed to utilise the electronic modes including advertisement on issuer’s website, the stock exchange’s website, and the debenture trustee’s website etc. to advertise the public issue and the requirement of advertising in newspapers may be done away with. This will save time and costs for the issuer.

Listing of fast-track public issues of debt securities: 

Also, it proposed the timeline for listing fast-track public issues of debt securities should be T 3 as opposed to T 6 for a regular public issue, a move aimed at considerably bringing down the timelines for raising funds through debt securities.

The issuers opting for the route should be allowed to utilize electronic modes to advertise the public issue. The requirement of advertising in newspapers should be done away with. 

Period of subscription:

The fast-track public issue of debt securities may be kept open for a minimum of one working day and a maximum of 10 working days. Further, in case of revision in the price band or yield, the extant bidding period may be extended by one more working day instead of three working days for a normal public issue.

Standardized Record Date:

Inconsistency of shut periods or record dates was noted and Sebi proposed to standardize record dates 15 days before payment due dates, ensuring uniformity. The record date is the date on which the investor must be the owner of the debt securities for corporate actions. In market parlance, the shut period refers to the number of days between the Record Date and the interest payment date/ redemption date.

GID and KID:

The GID filed for fast track public issuance of debt securities shall consist of all necessary disclosures as specified under Schedule I of NCS Regulations. 

The KID for a fast track public issue of debt securities shall contain the following information: (a) Part A – all disclosures that are relevant for a public issue but not in the GID e.g. Material changes from the GID, Material Developments, Risk Factors if any, not disclosed in the GID; (b) Part B – details of the offer of debt securities in respect of which the KID is being issued;

Retention Limit:

Further, the retention limit should be fixed at a maximum of five times of base issue size to provide more flexibility to the issuers in terms of fundraising.

Public comments on the draft offer:

The Sebi proposal includes reducing the time for public comments on draft offer documents to two days.  

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Published: 10 Dec 2023, 05:50 PM IST

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