Sebi eases norms for mandatory bond issuances, announces incentives for surplus

The exchanges, in coordination with each other, will also have to calculate the incentives and discincentives the company will have to pay on the end of the third year

Large corporates (LCs, which have raised more than the mandated share — 25 percent — of their qualified borrowings by issuing bonds will be incentivised through reductions in the annual listing fee of its debt securities and in the company’s contribution to the Core Settlement Fund (CSF), according to a circular issued by the market regulator on October 19.

LCs that have a shortfall will be disincentivised by being asked to pay an additional contribution to the CSF, added the circular.

The Securities and Exchange Board of India (SEBI) has been trying to deepen the corporate bond market, and this circular is in line with that effort, to ease the framework for fundraising by issuing debt securities by LCs.

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This revised framework will be applicable with effect from April 01, 2024, for LCs following the April-March financial year, and it will be applicable with effect from January 01, 2024, for LCs which follow the January-December financial year.

LCs have to raise not less than 25 percent of their qualified borrowings by way of issuance of debt securities in the financial years following the financial year in which the company has been identified as an LC.

From FY25 onwards, the requirement of mandatory qualified borrowing by an LC in an FY shall be met over a contiguous block of three years. That is, if a listed entity has been identified as an LC in financial year T, then it has to meet its mandatory requirement over T, T+1 and T+2.

If there is a surplus or a deficit, the LCs will be incentivised or disincentivised as given above.

Stock exchanges have been asked to identify the LCs based on their financial results and carry the names of these companies on their website, to help the companies meet their mandatory requirements.

The exchanges, in coordination with each other, will also have to calculate the incentives and disincentives the company will have to pay at the end of the third year.

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Clearing corporations have been asked to make changes and put in place the necessary infrastructure for LCs to comply with the provisions of incentive and disincentive w.r.t contribution to the core SGF. The clearing corporations also have to coordinate with the stock exchanges to ensure that LCs comply with these provisions.