Sebi's Proposed 'Fast Track' Concept for Debt Securities Issuance

The Securities and Exchange Board of India (Sebi) has set its sights on implementing a game-changing concept called "fast track" public issuance for debt securities.

Additionally, Sebi aims to significantly reduce the face value of these securities, including non-convertible debentures, from the existing Rs 1 lakh to Rs 10,000.

1. Facilitating Efficient Issuance for Frequent Issuers:

• Introducing 'Fast Track' Public Offering: This concept allows frequent issuers with a consistent track record to raise capital through public offerings with reduced time, cost, and effort.

• Simplified Offer Documents: The requirement to include audited financials in the offer document will be replaced with a QR code that links to the financials on the issuer's website. This reduces document size and increases accessibility.

• Standardized Record Dates: Record dates for interest and redemption payments will be standardized 15 days before the due date, streamlining the process.

• Faster Listing: The timeline for listing fast-track public issues will be reduced from T+6 to T+3, ensuring faster access to capital for issuers.

• Electronic Advertising: Issuers will be allowed to utilize electronic modes for advertising public issues, eliminating the need for newspaper advertising.

2. Increasing Retail Investor Participation:

• Reduced Face Value for Debt Securities: Sebi proposes reducing the face value of debt securities, including non-convertible debentures (NCDs) and non-convertible redeemable preference shares (NCRPS), issued on a private placement basis to Rs 10,000 from the current Rs 1 lakh. This makes these investments more accessible to retail investors.

• Appointing Merchant Bankers: Merchant bankers will be required to conduct due diligence for issuance of privately placed NCDs and NCRPS with a face value of Rs 10,000, ensuring investor protection.

• Simplified Debt Instruments: Only plain vanilla debt instruments with simple structures and no credit enhancements or structured obligations will be eligible for the reduced face value. This ensures transparency and reduces risk for retail investors.

Key Benefits of the Proposed Reforms:

• Reduced Time and Cost: The fast-track public offering process will significantly reduce the time and cost associated with debt issuance for frequent issuers.

• Increased Flexibility: Issuers will have greater flexibility in terms of fundraising, with a five-times retention limit for fast-track public issues.

• Enhanced Transparency: Simplified offer documents and standardized record dates will enhance transparency for investors.

• Improved Accessibility: Electronic advertising and reduced face value for privately placed debt instruments will improve accessibility for retail investors.

Ensuring Transparency and Simplicity

Sebi emphasizes the need for simplicity in the structure of these debt securities. The proposed securities should have a plain vanilla structure without any credit enhancements or structured obligations. Additionally, for the issuance of Securitised Debt Instruments (SDIs) at a face value of Rs 10,000, the appointment of a merchant banker is recommended.

Streamlining Disclosure Requirements

The regulator suggests innovative methods for sharing financial information. Instead of including audited financials in the offer document, Sebi proposes the provision of a QR code linking to the issuer's website. This QR code will grant access to the audited financials for the last three financial years and the stub period.

Proposed Timeline and Advertising Strategy

For fast-track public issues, Sebi recommends a reduced timeline for listing (T+3) compared to the standard public issue timeline (T+6). Moreover, the requirement of newspaper advertisements for such issues is proposed to be eliminated. The retention limit is suggested to be set at a maximum of five times the base issue size.

Seeking Public Feedback

Sebi has invited public comments on these proposals until December 30.