SEBI Proposes Fast-Track Public Debt Issuance, Easing Regulations for Ease of Business

The corporate debt market in India has been predominantly driven by private placements, with public issuances accounting for a mere 1-2% of the total funds raised. To address this imbalance and encourage public issuances, the Securities and Exchange Board of India (SEBI) has proposed the introduction of a fast-track mechanism for public issuance and listing of debt securities. Under the proposed framework, eligible issuers meeting specific criteria, such as being listed for at least three consecutive years, complying with relevant regulations, and having a credit rating of not less than "AA-" from at least one credit rating agency, can opt for the fast-track route. This streamlined process aims to reduce the time, cost, and effort involved in raising funds through public issuances. One of the key proposals is the acceptance of a General Information Document (GID) and Key Information Document (KID) as the offer document for both fast-track public issues and private placements. While the GID will be common for all issues made by the issuer during the year, the KID for private placements will be sent to a select group of investors, whereas the KID for fast-track public issues will be made available to the public. The eligibility criteria for issuers to undertake fast-track public issuances are stringent, ensuring a consistent track record of reporting and disclosure history. This includes being eligible under Regulation 5 【56†source】 of the NCS Regulations, having non-convertible securities or specified securities listed for at least three consecutive years, complying with relevant regulations, and having no regulatory actions pending against the issuer or its promoters/directors. To further enhance participation of non-institutional investors in the corporate bond market, SEBI has proposed reducing the minimum face value of privately placed NCDs or NCRPS to ₹10,000 【13†source】. However, in such cases, the issuer shall appoint a merchant banker to carry out due diligence and ensure appropriate disclosures in the private placement memorandum. Additionally, for issuances of Securitized Debt Instruments (SDIs) at a face value of ₹10,000, the appointment of a merchant banker will be mandatory 【14†source】. SEBI has also proposed rationalizing disclosures in offer documents by allowing issuers with listed outstanding NCDs to insert a QR code or web link for audited financials for the last three financial years and stub period financials 【17†source】. Furthermore, certain information, such as related party transactions and remuneration of directors, can be provided up to the latest quarter instead of the current financial year 【19†source】. To promote uniformity and standardization, SEBI has proposed standardizing the record date/shut period at 15 days before the due date of payment of interest/redemption 【20†source】. Additionally, the formats of due diligence certificates to be provided by debenture trustees have been harmonized 【22†source】. In the interest of cost reduction and environmental sustainability, SEBI has proposed providing discretion to listed entities to publish financial results in newspapers 【23†source】, as the information is already accessible on the internet and stock exchange websites. The proposed fast-track public issuance process aims to significantly reduce the timelines involved in raising funds through debt securities. For instance, the period for seeking public comments on the draft offer document could be reduced from seven working days to two working days 【31†source】, and the listing timeline could be shortened from T+6 to T+3 【35†source】. Furthermore, SEBI has proposed removing the minimum subscription requirement for banks and entities in the financial sector undertaking fast-track public issues of debt securities 【33†source】. This move recognizes the unique funding requirements of these entities, which are primarily driven by capital adequacy, onward lending, and repayment of existing debt, rather than capital expenditure-based needs. To provide more flexibility to issuers, SEBI has proposed allowing the retention of over-subscription up to a maximum of five times the base issue size for fast-track public issues of debt securities 【34†source】, compared to the current limit of 100% for regular public issues. # FAQs 1. **What is the rationale behind introducing the fast-track public issuance mechanism?** The fast-track public issuance mechanism aims to facilitate frequent issuers with a consistent track record to make public issues of debt securities with reduced time, cost, and effort. By streamlining the process, SEBI aims to promote ease of doing business and encourage public issuances, thereby broadening the investor base in the corporate debt market. 2. **Why is SEBI proposing to reduce the face value of privately placed NCDs/NCRPS?** The reduction in the face value of privately placed NCDs/NCRPS to ₹10,000 is intended to increase participation of non-institutional investors in the corporate bond market. The current high ticket size is perceived as a deterrent for such investors, restricting their ability to access the market. By reducing the face value, coupled with the appointment of a merchant banker for due diligence and disclosures, SEBI aims to mitigate risks and enhance investor protection. 3. **What are the implications of standardizing the record date/shut period?** Standardizing the record date/shut period at 15 days before the due date of payment of interest/redemption will promote uniformity and consistency in market practices. This move addresses the current inconsistency in the duration of the shut period, which varies across issuers and issuances. 4. **Why is SEBI proposing to remove the minimum subscription requirement for banks and entities in the financial sector?** Unlike manufacturing companies, entities in the financial sector do not have capital expenditure-based fund requirements. Their funding needs are primarily driven by capital adequacy, onward lending, and repayment of existing debt. Removing the minimum subscription requirement for these entities will ensure a consistent and economical influx of funds to support their operations. 5. **What are the potential benefits of the proposed changes for non-institutional investors?** The proposed changes, such as reducing the face value of privately placed NCDs/NCRPS, introducing the fast-track public issuance mechanism, and allowing higher over-subscription retention, are expected to enhance the participation of non-institutional investors in the corporate debt market. By lowering entry barriers and increasing accessibility, SEBI aims to broaden the investor base and promote greater liquidity in the market.