SEBI amends SEBI (DIP) guidelines on Non-Convertible Debentures

SEBI amends SEBI (DIP) guidelines on Non-Convertible Debentures

SEBI (DIP) Guidelines, 2000, have been amended by Securities and Exchange Board of India (SEBI) which has put in place a framework to enable a listed company make a combined offering of Non-Convertible Debentures (NCDs) with warrants to QIBs, under the Qualified Institutions Placement mechanism. Qualified Institutional Buyers can subscribe to the combined offering of NCDs with warrants or to the individual instruments, either NCDs or warrants, where separate books are run for NCDs/warrants.

The step was taken in wake of a proposal in the current year’s budget to enhance the tradability of Domestic Convertible Bonds (DCBs) which required a mechanism that can enable investors to separate the embedded equity option from the convertible bond and trade it separately. This mechanism further requires basic enablers like existence of long tenor callable Credit Derivatives market and ability to borrow stock for long tenors to enable short selling.

It was stated by SEBI that it has carried out the amendments after consultations with market participants to explore alternate structures, which would yield the same benefits as that of DCBs to the issuer and enhance the suite of products from the investors point of view.