Electronic platform must for private debt issues of Rs 2 billion: Sebi

The Securities and Exchange Board of India (Sebi) on Friday made electronic platform mandatory for all private placement issues on debt basis that have a threshold of Rs 2 billion. Currently, the mechanism is mandatory for all private placements of debt securities with an issue size of Rs 5 billion or more.
 

The new norms are aimed at achieving better and transparent price discovery through the bidding process. In a circular, Sebi said “all private placement of debt securities shall be required to be made through EBP (electronic book platform) if it is a single issue, inclusive of green shoe option, if any, of Rs 2 billion or more”.

Besides, a shelf issue, consisting of multiple tranches, which cumulatively amounts to Rs 2 billion or above in a financial year would have to opt for the electronic platform. Further, a subsequent issue, where aggregate of all previous issues by an issuer in a fiscal equals or exceeds Rs 2 billion would need to opt for the platform. Also, the regulator has come out with a standard operational guidelines pertaining to Know Your Client (KYC) and bidding hours for electronic book providers like stock exchanges.
 

According to Sebi, eligible participants bidding on proprietary basis, whose bid amount is at least Rs 15 crore or 5 per cent of the base issue size, whichever is lower, can bid directly.

In order to ensure operational uniformity across various EBP platforms, the bidding on the such platform will take place between 0900 hours to 1700 hrs, on the working days of the exchanges.

The regulator said that participants, prior to entering into the bidding process will be required to enroll with EBP. Such enrolment of a participant on an EBP will be one time exercise and will be valid till the time such enrolment is annulled or rescinded.

"An issuer, at its discretion, may withdraw from the issue process at any time, however subsequent to such withdrawal, the issuer shall not be allowed to access any of the EBP platform for a period of seven days from the date of such withdrawal," Sebi said.

With respect to KYC, the regulator said that verification will be undertaken by obtaining existing KYCs of clients from KRAs registered with Sebi.

For QIB investors bidding directly or through arranger, KYCs and enrolment will be done by the EBP, while for non QIB investors bidding directly, KYCs will be done by the issuer and enrolment will be done by the EBP.

Regarding the role of Electronic Book Providers (EBP), Sebi said that a recognised stock exchange can act as EBP and responsible for providing an on-line platform for placing bids and need to ensure safety, secrecy, integrity and retrievability of data.

The EBP need to have necessary infrastructure like adequate office space, risk management capabilities, manpower and other information technology infrastructure to effectively discharge its activities.

The Securities and Exchange Board of India (Sebi) in May last year had come out with a discussion paper, wherein it was proposed that electronic platform will be mandatory for all private placement issues on debt basis that have a threshold of Rs 50 crore.