New Delhi, Capital markets regulator Sebi on Tuesday exempted certain listed issuers from mandatory appointment of merchant bankers for private placement of debt securities.
The relaxation aims to ease the issuance of debt securities and expand retail investors’ access to high-rated securities.
Under the revised framework, eligible issuers can skip appointing a merchant banker, provided they meet the prescribed conditions.
In a circular issued on Wednesday, the market watchdog said they must be registered with a financial regulator such as SEBI, RBI, IRDAI or PFRDA, and should have been listed on a recognised stock exchange for at least one year.
There should be no pending fines or penalties imposed by Sebi or exchanges for non-compliance with applicable listing obligations. The stock exchanges will confirm this while granting in-principle approval for the issue.
The issuer must not have defaulted during the last three financial years and the current financial year on redemption, repayment or interest/ dividend payments relating to debt securities, non-convertible redeemable preference shares, securitised debt instruments, commercial papers, deposits or loans, Sebi said.
A statutory auditor’s certificate confirming this will have to be submitted to the stock exchange.
Further, the debt security must be unsubordinated/ senior and “secured” by a first or pari passu charge on the identifiable assets of the issuer. However, in case of Central Public Sector Enterprises, PSUs and statutory bodies, the debt security may be secured or unsecured, it added.
The regulator noted that the debt security must also carry a rating of at least AA- or above on the date of private placement. In case of multiple ratings, the lowest one will be considered for determining eligibility for exemption.
The revised provision applies to debt securities or non-convertible redeemable preference shares issued through private placement at a face value of Rs 10,000.
The Securities and Exchange Board of India (SEBI) said the provisions of this circular came into force with immediate effect, while stock exchanges have been asked to specify operational requirements and monitor compliance.
