SEBI Proposes Exemption From Merchant Banker Requirement For Small-Value Debt Issues
Add Preferred News Source
SEBI has proposed exempting small-value debt issues by listed entities from the mandatory appointment of a merchant banker, subject to conditions including regulatory oversight, at least one year of listing, and no defaults or pending fines or penalties.
The Securities and Exchange Board of India (SEBI) has proposed exempting eligible listed entities from the mandatory appointment of a merchant banker for small-value debt issues made through private placement.
The proposal applies to debt securities and non-convertible redeemable preference shares with a face value of ₹10,000. SEBI said the relaxation is aimed at reducing compliance costs and supporting the development of the debt market.
Why Does SEBI Want To Ease The Merchant Banker Requirement?
Under the existing rule, issuers are required to appoint at least one merchant banker for private placements of debt securities or non-convertible redeemable preference shares with a face value of ₹10,000.
SEBI said the mandatory appointment adds to the cost of capital and can affect the economic viability of smaller issuances. According to the regulator, the additional cost may discourage issuers from undertaking frequent small-value debt issuances.
The proposed exemption is therefore intended to reduce this compliance burden for issuers that meet the prescribed conditions.
Which Issuers Could Qualify For The Exemption?
The proposed relaxation would not apply to all issuers. SEBI has proposed that the issuer must be registered with or regulated by a financial sector regulator and must have been listed on at least one recognised stock exchange for a minimum of one year.
Stock exchanges would also have to check, while granting in-principle approval, that the issuer does not have any pending fines or penalties imposed by the regulator or the stock exchanges.
What Other Conditions Has SEBI Proposed?
The issuer must not have defaulted during the last three financial years or the current financial year on specified payment obligations.
These include repayment of deposits or interest on deposits, redemption of non-convertible preference shares or debt securities and the interest payable on them. The conditions also cover declaration and payment of dividends to shareholders, as well as repayment of term loans and interest payable on such loans.
The issuer would have to submit an auditor's certificate confirming compliance with these requirements to the stock exchange.
SEBI has issued the proposal as part of a consultation process and has invited public comments until 17 September.
The exemption will therefore depend on the outcome of the consultation and SEBI's subsequent decision on the proposed changes.
Also Read - Paramotor Digital Technology Gets SEBI Nod For IPO After Confidential Filing
This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Vishwa has spent 10+ years across fintech and FMCG doing what most people miss, connecting the dots, catching trends before they trend, and finding the angle nobody else thought to ask about.
At Kotak Neo, she drives content strategy for neoshorts, Kotak News Desk, and Investing Guide, turning market noise into something worth reading.
When she's not decoding markets, she trades charts for canvases, chasing art, painting, and architecture across cities she's yet to explore.
Right Tools, Rich Insights
