Sebi allows zero-coupon bonds to be issued in smaller denominations

Sebi had earlier allowed issuers to cut face value to ₹10,000 only for interest- or dividend-bearing instruments with fixed maturity and no structured obligations

The Securities and Exchange Board of India (Sebi) has allowed zero-coupon bonds to be issued in reduced denominations of ₹10,000 by modifying the conditions under which issuers can lower the face value of non-convertible debt securities and non-convertible redeemable preference shares (NCRPS) issued through private placement.   In an earlier circular, Sebi had permitted issuers to reduce the face value of such securities to ₹10,000, provided they were interest- or dividend-bearing instruments with fixed maturity and carried no structured obligations. However, the requirement effectively excluded zero-coupon bonds, which do not offer periodic interest payments.   Responding to feedback from market participants, Sebi acknowledged that zero-coupon bonds — typically issued at a discount and redeemed at par — generate returns through price appreciation rather than periodic coupons. These instruments offer compounded returns over time and are increasingly used by investors seeking portfolio diversification, the regulator said.