Sebi Proposes Exemption For Small Debt Issues

The Securities and Exchange Board of India (Sebi) has proposed an exemption from the mandatory appointment of a merchant banker for small-value debt issues through private placement by listed entities.

The current rule requires issuers to appoint at least one merchant banker for private placements of debt securities or non-convertible redeemable preference shares with a face value of Rs 10,000. This increases the cost of capital for issuers, making small-value debt issuances less economically viable.

Sebi has proposed to exempt small-value debt issues from the requirement to appoint merchant bankers, subject to certain conditions. The issuer must be registered or regulated by a financial sector regulator and listed on any recognised stock exchange for at least one year.

Additionally, the issuer must not have defaulted in the last three financial years and the current financial year regarding repayment of deposits or interest payable on them. The issuer must also submit an auditor's certificate confirming this to the stock exchange.

The proposed exemption is aimed at reducing compliance costs and boosting market development. Sebi has sought public comments on the proposals until September 17.

The move is expected to benefit listed entities that issue small-value debt securities, as it will reduce their compliance costs and make it easier for them to access capital markets.

Sebi's proposal is part of its efforts to simplify and streamline regulatory requirements, making it easier for companies to raise capital and comply with regulations.

The exemption, if approved, will apply to small-value debt issues with a face value of Rs 10,000. This will help to reduce the cost of capital for issuers and make small-value debt issuances more economically viable.

Sebi's consultation paper on the proposal is available on its website, and stakeholders can submit their comments until September 17.

The proposal is a significant development in the Indian capital market, as it aims to reduce regulatory burdens and promote market development. It is expected to benefit listed entities, investors, and the overall economy.