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Tighter norms for debt securities

Mumbai, June 17: The Securities and Exchange Board of India today tightened norms governing the public issue of debt securities by stipulating that the issuers would have to attain at least 75 per cent subscription or refund money to the subscribers.

The market regulator prescribes a minimum subscription limit of 90 per cent in case of an initial public offering.

However, for public issue of non-convertible debentures (NCDs), there is no such requirement prescribed under Companies Act, 1956. According to Regulation 12 of Sebi (Issue and Listing of Debt Securities) Regulations, 2008, the issuer may decide the amount of minimum subscription, which it seeks to raise through NCDs and disclose the same in the offer document.

In a circular issued today, Sebi said the minimum subscription for public issue of debt securities had been set at 75 per cent of the base issue size for both non-banking finance companies (NBFCs) and non-NBFC issuers. If the issuer does not receive minimum subscription, the entire application money will have to be refunded within 12 days from the date of the closure of the issue.

“In the event, there is a delay, by the issuer in making the refund, then the issuer shall refund the subscription amount along with interest at the rate of 15 per cent per annum for the delayed period,” the market regulator said.

Sebi, however, exempted the issuers of tax-free bonds, as specified by the Central Board of Direct Taxes, from the minimum subscription limit.

The market regulator also sought to increase the transparency of such issues, particularly with regard to the utilisation of the proceeds.

Meanwhile, Sebi said investments by foreign portfolio investors in non-convertible shares or debentures will be included within the $51-billion limit meant for corporate debts.

 
 
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