New SEBI Regulation On Wednesday, the Securities and Exchange Board of India (SEBI) announced a relaxation in its rules governing private placement of debt securities. The regulator has removed the requirement for listed issuers to appoint a merchant banker when raising debt through private placement, provided they satisfy a set of eligibility conditions. The change is effective immediately and is part of SEBI’s effort to streamline fundraising and increase retail investor access to high‑rated debt instruments.
Eligibility Criteria Under the revised framework, a listed issuer can privately place debt securities with a face value of at least Rs 10,000 without engaging a merchant banker if:
1. **Regulatory status** – The issuer is registered with or regulated by a recognised financial sector regulator in India, such as SEBI, the Reserve Bank of India (RBI), the Insurance Regulatory and Development Authority of India (IRDAI) or the Pension Fund Regulatory and Development Authority (PFRDA). 2. **Listing tenure** – The issuer has been listed on a recognised stock exchange for a minimum of one year. 3. **Compliance record** – There are no pending fines or penalties imposed by SEBI or stock exchanges for non‑compliance with the SEBI Listing Obligations and Disclosure Requirements Regulations. 4. **Default history** – The issuer has not defaulted in the last three financial years or the current year on redemption, repayment, interest payments, or dividend payments related to debt securities, non‑convertible redeemable preference shares, securitised debt instruments, commercial papers, deposits or loans. A statutory auditor’s certificate confirming this condition must be submitted to the stock exchange. 5. **Security characteristics** – The debt security must be senior or unsubordinated and secured by a first or pari passu charge on identifiable assets of the issuer. Central public sector enterprises, public sector undertakings and statutory bodies may issue secured or unsecured debt under this exemption. 6. **Credit rating** – The security must carry a minimum rating of AA‑ on the date of private placement. If multiple ratings are available, the lowest rating is used for eligibility assessment.
Stock exchanges will verify compliance with these conditions and grant in‑principle approval for the debt issue.
Impact on Issuers and Investors For issuers, the removal of the merchant banker requirement reduces the cost and complexity of raising debt through private placement. It also shortens the time required to structure and launch a debt issue, potentially accelerating capital‑raising cycles.
Retail investors stand to benefit from a broader range of high‑rated debt securities available through private placement. By easing regulatory hurdles, SEBI aims to make these instruments more accessible to a wider investor base, thereby deepening the market for debt securities.
Key Takeaways - SEBI has relaxed the merchant banker mandate for certain debt issuances. - Eligibility hinges on regulatory status, listing tenure, compliance record, default history, security characteristics, and credit rating. - The change is designed to simplify fundraising and expand retail investor access to high‑rated debt. - The new rules apply immediately and are subject to stock‑exchange verification.
SEBI’s decision reflects market feedback and aligns with its broader objective of fostering a more efficient and inclusive capital market.