Sebi: Sebi cuts face value of debt securities to boost liquidity in corporate bond market

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To improve liquidity in the corporate bond market, Sebi on Friday reduced the face value of debt securities and redeemable non-convertible preferred shares issued on a private placement basis to Rs 1 lakh from the current Rs 10 lakh . The move came after the regulator received representations from various market participants, including issuers, asking for a review of the cuts.

In addition, 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 liquidity in the corporate bond market, Sebi said in a circular.

The regulator said the nominal value of each debt security or non-convertible redeemable preferred stock issued on the basis of a private placement “will be Rs 1 lakh”.

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 to all issuances of non-convertible redeemable debt securities and preferred shares on a private placement basis through new ISINs, beginning January 1, 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 retain the value nominal at Rs 10 lakh or Rs 1 lakh.

The necessary addendum must be issued by that issuer to the shelving memorandum, Sebi said.


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