SEBI proposes merchant banker exemption for certain small-value private debt issues

The proposal exempts debt securities or non-convertible redeemable preference shares issued via private placement at a face value of ₹10,000, subject to certain eligibility conditions

New Delhi, Aug 27: Markets regulator Sebi on Thursday proposed granting an exemption from mandatory appointment of a merchant banker for small-value debt issued through a private placement basis by listed entities. The move is aimed at reducing compliance costs and boosting market development.The current rule requires issuers to appoint at least one merchant banker for private placements of debt securities or non-convertible redeemable preference shares with a face value of Rs 10,000. This increases the cost of capital for issuers, eroding the economic viability of planned issuances, thereby discouraging frequent small-value debt issuances, Sebi said in its consultation paper.Chhatrapati Sambhajinagar To Host District Investment Conference On August 29Sebi proposes exemptionAccordingly, Sebi has proposed to exempt "small-value debt" issues from the requirement to appoint merchant bankers."In order to facilitate fund raising by issuers of debt security/non-convertible redeemable preference share on a private placement basis at a face value of Rs 10,000 (i.e., small-value debt), it has been decided to exempt such issues from the requirement of merchant banker appointment, subject to certain conditions," Sebi said.This includes the issuer being registered or regulated by a financial sector regulator and listed on any recognised stock exchange(s) for at least one year. Further, stock exchanges, when granting in-principle approval, must ensure the issuer has no pending fines or penalties levied by the regulator or the bourses.Also Watch:Conditions for issuersAdditionally, the other conditions require that the issuer has not defaulted in the last three financial years and the current financial year regarding the repayment of deposits or interest payable on them, redemption of non-convertible preference shares or debt securities and interest payable on them, declaration and payment of dividend to shareholders, and repayment of any term loan or interest payable on it.The issuer must submit an auditor’s certificate confirming this to the stock exchange.The Securities and Exchange Board of India (Sebi) has sought public comments till September 17 on the proposals.(Except for the headline, this article has not been edited by FPJ's editorial team and is auto-generated from an agency feed.)