SEBI Reduces Face Value of Debt Problems to Rs1 Lakh; Liquidity in the corporate bond market is increasing

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Market regulator Securities and Exchange Board of India (SEBI) on Friday reduced the face value of debt securities and non-convertible redeemable preferred shares issued on the basis of a private placement to Rs1 lakh from the current Rs10 lakh. The move aims to improve liquidity in the corporate bond market, SEBI said.

The regulator said it has received representations from various market participants, including issuers, asking for a review of the cuts. “In particular, non-institutional investors view the high ticket size as a deterrent that limits their ability to access the corporate bond market. If the face value and trading lot are reduced, more investors can participate, which, in turn, will improve the liquidity of the corporate bond market,” he said.

Under current rules, the face value of each redeemable non-convertible debt security or preferred stock issued on the basis of a private placement is Rs 10 lakh and the trading lot is equal to the face value.

The new guidelines will apply from 1 January 2023.

However, with respect to the shelf placement memorandum which is valid as of January 1, 2023, the issuer thereof will have the option, while raising funds through the tranche placement memorandum, to maintain the value rated at Rs10 lakh or Rs1 lakh, SEBI clarified. The necessary addendum must be published by this issuer to the shelf placement memorandum, SEBI said.

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