(Revision in Chapter V of the Operational Circular for issue and listing of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper)
SEBI vide its Circular dated 28th October, 2022 made amendments in Chapter V (Denomination of issuance and trading of Non-convertible Securities) of the Operational Circular:
| Sr. No. | Part/Chapter/Section /Sub-section(s) | Chapter V of Operational Circular revised dated 28th October, 2022 | Chapter V of Operational Circular dated 10th August, 2022 | Comment |
| 1. | Paragraph 1.1 of Chapter V of Operational Circular dated 10th August, 2022 shall be replaced with the following: | The face value of each debt security or non-convertible redeemable preference share issued on private placement basis shall be Rs. One lakh. | The face value of each debt security or non-convertible redeemable preference share issued on private placement basis shall be Rs. Ten lakh. | Due to this amendment, limit for issue of the face value of each debt security or non-convertible redeemable preference share issued on private placement basis has been reduced to Rs. One lakh which previously was of Rs. Ten lakh. |
| 2. | Paragraph 2.1 of Chapter V of Operational Circular dated 10th August, 2022 shall be replaced with the following: | The face value of the listed debt security and non-convertible redeemable preference share issued on private placement basis traded on a stock exchange or OTC basis shall be Rs. One lakh. | The face value of the listed debt security and non-convertible redeemable preference share issued on private placement basis traded on a stock exchange or OTC basis shall be Rs. Ten lakh. | Due to this amendment, the face value of the listed debt security and non-convertible redeemable preference share issued on private placement basis traded on a stock exchange or OTC basis has been reduced to Rs. One lakh which previously was of Rs. Ten lakh. |
SEBI in the circular said that it has received representations from various market participants, including issuers, requesting for review of the said denominations. In particular, non-institutional investors consider the high ticket size as a deterrent which restricts their ability to access the market for corporate bonds. If the face value and trading lot is reduced, more investors can participate, which in turn will enhance the liquidity in the corporate bond market.
It is to be noted that the provisions of this circular shall be applicable to all issues of debt securities and non-convertible redeemable preference shares, on private placement basis, through new ISINs, on or after 01st January, 2023.
Provided that with respect to a shelf placement memorandum which is valid as on 01st January, 2023, the issuer thereof shall have the option while raising funds through tranche placement memorandum, to keep the face value at Rs. Ten lakhs or Rs. One Lakh. Necessary addendum shall be issued by such issuer to the shelf placement memorandum.
This circular shall be applicable to all Issuers who have listed and/ or propose to list Non-convertible Securities; Recognised Stock Exchanges; Registered Depositories; Registered Credit Rating Agencies, Debenture Trustees, Merchant Bankers, Registrars to an Issue and Share Transfer Agents and Bankers to an Issue.
About the Author
