/financial-express-hindi/media/media_files/cCIB60vMpL5ppNs7moZN.jpg "SEBI’s big announcement, face value of debt securities reduced to Rs 10,000, retail participation will be boosted")
Sebi reduces face value of debt securities to Rs 10,000: The country’s market regulator Securities and Exchange Board of India (Sebi) has taken a big step to promote the participation of retail investors in the corporate bond market. Under an announcement made on Wednesday, SEBI has reduced the face value of debt securities in the corporate bond market from the current Rs 1 lakh to Rs 10,000. Market players believe that reducing the size of investment in debt securities will encourage retail or non-institutional investors to participate in the corporate bond market, which is expected to increase liquidity in the market.
The face value was Rs 10 lakh till 2022
You can also guess how big this decision of SEBI is from the fact that the face value of corporate bonds used to be Rs 10 lakh till 2022. In October 2022, SEBI reduced the face value of corporate bonds from Rs 10 lakh to Rs 1 lakh directly. And now SEBI has brought it within the reach of retail investors by making it just Rs 10,000. This decision of SEBI can be considered a historic step for the Indian corporate bond market.
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What is in SEBI’s circular
Announcing its decision in a circular issued on Wednesday, SEBI said, “Debt security instruments or non-convertible redeemable preference shares with a face value of Rs 10,000 can be issued on a private placement basis.” However, certain conditions have to be followed while doing so. For example, the issuer must appoint at least one merchant banker and non-convertible debentures (NCDs) and non-convertible debenture redeemable preference shares should be ordinary instruments paying interest or dividend. SEBI said that credit enhancements will be allowed through such instruments.
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Merchant banker to be appointed
According to SEBI’s circular, corporates issuing bonds can raise funds through tranche placement memorandum or key information document at a face value of Rs 10,000, provided at least one merchant banker is appointed for due diligence related to such issue. Apart from this, the bond issuer will also have to issue a shelf placement memorandum or general information document (GID).
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