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A BALASUBRAMANIAN
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Head, Fixed Income,
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| Birla SunLife Mutual
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| When a corporate wants to raise funds overseas, it needs to complete various formalities like preparing a proper offer document with sufficient disclosures and also conduct road shows to sell the float.
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| Currently, the transparency required when issuing bond overseas is much greater than what is required locally.
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| Therefore, there is a need to regulate the bond market to bring in a lot more transparency.
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| In the last 2 years or so, the corporate bond market has developed due to the electronic form of trading. However, there are still issues that remain to be addressed.
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| These are basically, availability of proper offer document, status of listing of bonds on the stock exchanges, the role of trustees, minimum disclosure requirements as is done currently for equity listing, creation of security etc.
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| If one looks at all placements of bonds, the listing clause is a part of the offer document and the instruments are eligible for trading on the stock exchanges.
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| However, there is no mandatory requirement to comply with the standard norms of the stock exchanges. Thus, there is a greater need to streamline the corporate bond market to bring in more transparency in various fields like documentation for each and every issuance of bond, compulsory dematerialisation, and compulsory listing with stock exchanges among others.
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| However, the bourses and regulators should also look at certain other options to facilitate a smoother transition to a new era of transparent corporate bond market.
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| First and foremost, there has to be a deadline to bring the existing outstanding corporate bonds under one fold.
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| There could be a deadline of say six months to comply with disclosure norms and other requirements of the Securities and Exchange Board of India and the exchanges.
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| For this purpose, stock exchanges should consider waiver of the listing fees at least in the beginning and subsequently charge a low listing fees so as to encourage corporates to list their bonds.
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| Financial disclosure norms should also be made compulsory as is the case for equity listing with the disclosure on the stock exchange website.
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| The issuer should also put out quarterly financial results in its website. In general, corporate bond issuance is done at a greater speed as against equity placement.
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| At the same time, investors too have to earn on a daily basis on their surpluses or on their investment as the debt markets globally are very dynamic and vibrant.
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| Therefore, the regulator can introduce two sets of requirements one pre-negotiation and the other post-negotiation.
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| Of course, the transaction should get concluded within a timeframe of say one week subject to filing the offer document with Sebi, exchanges, rating agencies etc.
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| The move of the RBI to restrict investments in one-year bonds is welcome. However, it should consider allowing institutional investors to invest in floating rate instruments of any maturity, especially at a time when the interest rates are low and every investor is in need of floating rate instruments in his bouquet.
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| The corporate bond market size would increase substantially once these changes are made in a phased manner and we can have a vibrant and transparent bond market in India.
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| Few issues remain unclear
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G SUBRAMANIAN
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Chief Executive Officer,
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| Prebon Yamane
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| The debt capital market provides corporates an opportunity to access funds quickly at market determined interest rates rather than going through the elaborate multi-tier discretionary process of the banking system.
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| In a scenario where prime lending rates did not move down in tandem with the downtrend in market yields, AAA-rated companies have found it efficient to access funds in a very short period with minimal formalities.
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| However, some key issues relating to the underlying security and cash flows were not adequately addressed.
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| It is a common practice in the market to technically abide by the guidelines, by providing assets as security, which are but a tiny fraction of the funds raised.
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In a sense, the borrowing is actually
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