QIP mechanism: Sebi makes e-book platform mandatory for NCDs portion

Markets regulator Sebi on Friday came out with guidelines for non-convertible debentures with warrants products, whereby it made electronic book platform mandatory for the NCDs portion of the issue

Markets regulator Sebi on Friday came out with guidelines for non-convertible debentures with warrants products, whereby it made electronic book platform (EBP) mandatory for the NCDs portion of the issue.

The move is aimed at streamlining the procedure of issuance and applicability of EBP mechanism on the NCDs portion.

In cases, wherein the size of NCDs portion is above threshold prescribed under the rules, Sebi said "EBP platform mechanism shall be mandatory for NCDs portion of the issue (for both stapled and segregated offer)," according to the circular.

Currently, listing of NCDs of Rs 200 crore or above in a year is possible only if such issuance is through the electronic book mechanism.

In a qualified institutions placement (QIP) of NCDs instrument along with warrants, an investor can either subscribe to the combined offering of NCD instruments with warrants or to the individual securities (that is, either NCD or warrants).

It depends upon the type of offering made by the issuer -- whether the issuer has offered staple or segregated product.

In the staple product, warrants are attached with NCDs, while in the segregated product, NCDs and warrants can be subscribed separately.

Of the 'total issue size' of the issue, at least 40 per cent size will consist of 'warrants portion', the Securities and Exchange Board of India (Sebi) said.

It may be noted that 'total issue size' will mean combined size of NCDs issue and the aggregate size of the warrants portion, including the conversion price of warrants.

In December, the regulator had came out with a consultation paper regarding issue of NCDs along with warrants as a staple product and a segregated product offered through qualified institutional placement route.

Through the consultation paper, Sebi had proposed to discontinue segregated offerings of NCDs along with warrants to institutional investors under the QIP mechanism.

Further, the regulator suggested that staple offerings of NCDs along with warrants to institutions investors may be retained with the ability to segregate the instruments after the issuance or allotment.

The regulator had also proposed to allow issuance of naked warrants to institutional investors through QIP route.