Large cos to raise 25% of long-term borrowings through bonds: Sebi

Large listed companies will soon be required to raise at least 25 per cent of their long-term borrowings through corporate bonds, with Sebi board approving a revised regulatory framework Tuesday.

The board of Sebi has cleared the framework for enhanced market borrowings by large corporates and it would come into force from April 1, 2019.

Large corporates would have to raise "25 per cent of their incremental borrowings" for a particular year through the bond market, Sebi said.

Under the new framework, companies, other than scheduled commercial banks, that meet certain criteria would be categorised as large corporates.

Long-term borrowings are those having a maturity period of more than one year.

With respect to the new framework, the Securities and Exchange Board of India (Sebi) said that such borrowings would exclude external commercial borrowings and inter-corporate borrowings between a parent and its subsidiaries.

For the first two years -- 2019-20 and 2020-21 -- the entities concerned would be subject to "comply or explain" mechanism. In case of failure to raise 25 per cent of the long term borrowings through corporate bonds, then the same has to be disclosed by the large corporate to the stock exchange.

According to the regulator, the requirement of 25 per cent incremental borrowing through bond market would be tested for "contiguous block of two years" from 2021-22 onwards.

"At the end of two years block, if there is any deficiency in the requisite bond borrowing, a monetary penalty/ fine of 0.2 per cent of the shortfall shall be levied," Sebi said.