Debenture listing? Sebi tightens it a little bit more

Mumbai: Market regulator Sebi today issued additional disclosure norms for issuance of market-linked debentures that seek listing on stock exchanges.

The new guidelines, effective November 1, come against the backdrop of companies issuing hybrid securities - which are combination of debt and equity - through private placements. ‘Structured products’ or ‘market linked debentures’ have an underlying principal component in the form of debt

securities and the returns are linked to market.

[caption id=“attachment_95388” align=“alignleft” width=“380” caption=“The new guidelines, effective November 1, come against the backdrop of companies issuing hybrid securities. AFP”]  [/caption]

Sebi said that the issuer of such instruments should have a minimum net worth of Rs 100 crore. Besides, the issuer will have to raise a minimum Rs 10 lakh through these products.

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Sebi, however, said that securities where the principal amount of the investors is not protected, would not be governed by such guidelines. It further said that the company coming out with such issues will have to prominently display the risk factors related to the instrument.

“A risk factor shall be prominently displayed stating that in case of principal/capital protected market linked debentures, the principal amount is subject to credit risk of the issuer whereby the investor may or may not recover all or part of the funds in case of default of the issuer,” it added.

The issuer also has to give indicative returns on an annualised basis that the investor could expect from the said instrument. It also asked the companies to specify norms in the offer document for pre-mature redemption.

PTI