SEBI's Fast Track System for Public Debt Securities Issuance

To expand the bond market, SEBI plans to lower the face value of debt securities—including non-convertible debentures—issued through private placement from Rs 1 lakh to Rs 10,000. It also plans to implement the idea of "Fast Track" public issuance for debt securities. Should the action be taken, it would also facilitate business transactions.

"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," according to the consultation paper released by Sebi.

SEBI has "proposed to permit issuers to launch NCDs (non-convertible debentures) or NCRPS (non-convertible redeemable preference shares) with the face value of Rs 10,000" to increase the involvement of non-institutional investors in the corporate bond market.

SEBI stated that in these kinds of situations, the issuer ought to designate a merchant banker to conduct due diligence before issuing such privately placed NCDs and NCRPS, as well as fulfil the disclosure obligations outlined in the private placement memorandum.

It further stated that such debt securities should not have any structured obligations or credit enhancements and should instead have a straightforward structure.

This occurred after Sebi reduced the face value from Rs 10 lakh to Rs 1 lakh in October 2022. The choice has improved non-institutional investors' involvement in the bond market, as has the mainstreaming of Online Bond Platforms (OBPs).

It was noted that non-institutional investors contributed 4% of the total amount raised between July and September 2023, compared to the industry average of less than 1%. In addition, 1974 users (investors) have completed trades totalling approximately Rs 333 crore on the OBPs, according to SEBI.

Furthermore, if Securitized Debt Instruments (SDIs) with a face value of Rs 10,000 are issued, the regulator has recommended that a merchant banker be appointed.

SEBI recommended that the audited financial statements for the last three fiscal years and the financial statements for the Stub period be included as a QR code that can be scanned to access the financial statements on the issuer's website, rather than being inserted into the offer document.

Additionally, specifics about certain data needed for the current year, like Related Party Transactions (RPTs) and director compensation, among other things, must be provided as needed through the most recent quarter. Additionally, Sebi has recommended that record dates be standardized to be 15 days ahead of the interest or redemption deadline.

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

Sebi proposed reducing the amount of time that the public must be consulted on a draft offer document for fast-track public issues to two working days.

Additionally, to significantly shorten the timeframes for raising money through debt securities, it suggested that the listing period for fast-track public issues of debt securities should be T+3 rather than T+6 for a regular public issue.

The requirement to advertise in newspapers should be eliminated, and issuers who choose this route should be permitted to use electronic media to publicize the issue. For a minimum of one working day and a maximum of ten working days, such issues should be left open.

It has been suggested that banks and other financial sector organizations should no longer be required to pay a minimum subscription when using the route to issue securities.

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

The public is invited to provide feedback on the proposals until December 30th, according to the Securities and Exchange Board of India (SEBI).