Sebi plans to introduce ‘fast track’ concept for public issuance of debt securities

“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 said in its consultation paper.

To further enhance the participation of non-institutional investors in the corporate bond market, Sebi 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.”

However, in such cases, the issuer should appoint a merchant banker who would carry out due diligence for the issuance of such privately placed NCDs and NCRPS and disclosure requirements in the private placement memorandum, Sebi said.

Further, such debt securities should be plain vanilla with a simple structure and should not have any credit enhancements or structured obligations, it added. This came after Sebi in October 2022 cut the face value to ₹1 lakh from ₹10 lakh earlier. The decision, along with the mainstreaming of Online Bond Platforms (OBPs) has helped enhance the participation of non-institutional investors in the bond market.

During the period from July to September 2023, it was observed that non-institutional investors subscribed to 4% of the total amount raised as compared with the general average of less than 1%. Besides, the total volume of trades undertaken on the OBPs aggregates to around Rs 333 crore by 1974 users (investors), Sebi noted.

Further, the regulator has suggested the requirement of appointment of a merchant banker in case of issuance of Securitised Debt Instruments (SDIs) at a face value of ₹10,000.

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 should be allowed to be provided as a QR code scanning which opens the web link to the financials on the issuer’s website.

Further, details of certain information required for the current year such as Related Party Transactions (RPTs), and remuneration of directors among others to be specified as required up to the latest quarter. Also, Sebi has suggested that record dates should be standardised 15 days before the due date of payment of interest or redemption.

The regulator has “proposed to consider, like equity issuance, an avenue to debt issuers to make the issuance of public issues on fast-track basis”.

Suggesting modalities, Sebi said that the need to seek comments from the public on a draft offer document for fast-track public issues should be reduced to two working days. Also, it proposed that 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 and the requirement of advertising in newspapers should be done away with. Such issues should be kept open for a minimum of one working day and a maximum of 10 working days.

It has been proposed that the requirement for minimum subscription for banks and entities in the financial sector, when undertaking issue through the route, should be abolished.

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. The Sebi has sought comments from the public till December 30 on the proposals.