Press Trust of India | New Delhi January 11, 2016 India’s capital markets regulator Sebi today approved new norms and embraced a fintech approach to make electronic book mandatory for all private placement issues on debt basis, having a threshold of more than Rs 500 crore.
The move is aimed at improving the efficiency, transparency of the price discovery mechanism and also reduction of cost and time taken for such issuance.
The new norms, which were approved by Sebi’s board at a meeting here today, would introduce “Primary Market Debt Offering through private placement on electronic book”.
The electronic book mechanism would be mandatory for private placement memorandums of bonds above Rs 500 crore. However, the mechanism would be voluntary for private placement issues where there is a single investor.
“Requirement of minimum bid size for institutional investors is left to the discretion of the issuer,” Sebi said in a press statement issued after the board meeting.
The issuer would provide the draft private placement memorandum to the bidders without incorporating coupon details.
Such an electronic book may be created by entities to be named as Electronic Book Providers (EBPs) that would provide all bids/ application to the issuer after end of bidding.
Further, EBP would disclose aggregate volume data on anonymous basis to avoid any speculation.
The Securities and Exchange Board of India (Sebi) said that recognised stock exchanges would be eligible to act as EBP.
“Any dispute between issuer and bidders or between EBP or bidders before listing of privately placed bonds in RSE shall be settled as per their agreement,” it added.
According to an estimate, issuances through private placement bonds have increased from Rs 1.73 lakh crore in 2008-09 to Rs. 4.04 lakh crore in 2014-15.
In 2014-15, private placement accounted for 98 per cent of debt securities issuances that have been subsequently listed.
Last month, Sebi had floated a draft paper and in this regard and comments were sought from all the stakeholders till December 18.