Sebi notifies rule for listing non-convertible debt securities on exchanges

Sebi has amended rules under which listed entities with outstanding non-convertible debt securities will be required to list subsequent issuance of such securities on stock exchanges.

This will come into effect from January 1, 2024, the Securities and Exchange Board of India (Sebi) said in a notification uploaded on its website on Thursday.

The move is aimed at facilitating transparency in price discovery of non-convertible debt securities, providing better disclosures to investors and the market, and avoiding ISIN-level confusion and possible mis-selling of unlisted bonds.

In its notification, Sebi said certain types of issuances have been exempted from the applicability of this requirement.

Those included capital gains tax debt securities issued under Section 54EC of the Income Tax Act, 1961; those Non-Convertible Debts (NCDs) where parties have agreed to hold the securities till maturity and accordingly will be unencumbered; and NCDs issued following an order of any court or tribunal or regulatory requirement as stipulated by a financial sector regulator -- Sebi, RBI, IRDA, PFRDA or IBBI.

Sebi said the securities issued by the listed entity will be locked in and held till maturity by the investors and will be encumbered.

This came after the board of Sebi approved a proposal in this regard in June. Sebi brings in provisions for listing.

"If an entity with listed debt securities has outstanding unlisted NCDs as of December 31, 2023, the entity will have the option to list them, but it would not be mandatory," the regulator had stated at the time of the board meeting.

Further, Sebi said a listed entity proposing to issue securities will have to disclose to the stock exchanges all the key terms of such securities, including interest rate charges and period of maturity.

Last month, Sebi notified a new framework prohibiting listed entities, with more than 200 non-qualified institutional buyer holders of non-convertible debt securities, from delisting voluntarily.

Under the new rule, the listed entity will have to obtain permission from all holders of non-convertible debt securities within 15 working days of receiving the notification of delisting.

Earlier, entities were allowed to delist by giving a prior intimation to the stock exchange about the meeting of the board of directors, where the proposal for a voluntary delisting was considered.