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SEBI May allow Unlisted Firms to Sell Debt Securities

SEBI May allow Unlisted Firms to Sell Debt Securities



SEBI May allow Unlisted Firms to Sell Debt Securities

For unlisted companies looking to raise funds by selling debt securities on the stock exchange platform, the SEBI will it easier now. The focus is on companies that have not listed their shares but want to list only their debt instruments, but shied away as their had to comply with rules similar to equity listings on the exchanges.

The SEBI has taken this step in order to make easier for small companies to list their debt in market in India.

This move will also help the companies which have already listed their debts. Unlisted companies that traded debt papers around Rs 5,38,000 crores till October 2019.

Sebi had sent an e-mail stating they will soon start the constitution process with the market participants. Their aim is to make Indian debt markets attractive for smaller companies. But this e-mail remained unanswered. The SEBI has ensured market transparency which is not compressed in the process of easing norms.

Ministry of Corporate Affairs had appointed the Company Law Committee who had an exclusive discussion with the market regulator for this development.

It was suggested that insurer will have to follow at least basic norms to sell the debt papers to public investors. It looks difficult to exempt such companies as mutual funds are key investors in such papers.

Companies choose to list their debt to attract larger base of investors especially mutual funds. Mutual funds are allowed to invest in unlisted papers with a restriction on cap on maximum investment. SEBI board requirements  are also to be followed by Mutual funds such as:

  • Appointment of Key managerial personnel (KMP)
  • Rotation of auditors
  • Disclosure of median and average wages paid by the company.
  • Insider trading rules even though there are not listed shares.

Private companies will raise funds by way of listing the debentures as the proposed changes will reduce the tightened norms as well as compliance burden.

As part of government’s efforts there measures are seen to revive the Indian debt market which has being reeling under liquidity crisis along with problems in few non-banking financial companies hastened into a market wide issue.


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