SEBI Reduces Face Value for Debt Issues to Rs1 Lakh; Corporate Bond Market Liquidity Gets Boost
Moneylife Digital Team 31 October 2022
Market regulator Securities and Exchange Board of India (SEBI) on Friday reduced the face value of debt security and non-convertible redeemable preference shares issued on private placement basis to Rs1 lakh from the current Rs10 lakh. The move is to enhance liquidity in the corporate bond market, SEBI said.
The regulator said it has received representations from various market participants, including issuers, requesting for review of the 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 said.
Under the current rules, the face value of each debt security or non-convertible redeemable preference share issued on private placement basis is Rs10 lakh and the trading lot is equal to the face value.
The new guidelines will be applicable from 1 January 2023.
However, with respect to shelf placement memorandum which is valid as on 1 January 2023, the issuer thereof will have the option while raising funds through tranche placement memorandum to keep the face value at Rs10 lakh or Rs1 lakh, SEBI clarified. Necessary addendum need to be issued by such issuer to the shelf placement memorandum, SEBI said.
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