At the invitation of the public, capital markets regulator Securities Exchange Board of India (Sebi) has released a consultation paper on assessment of issuance and listing of debt instruments and securities securities. For those unaware, Sebi had set up a working group to review the regulations governing securitized debt instruments (SDI), which came up with a list of proposals.
Debt securitization is a process of combining assets and then selling them to investors in small units. The cash flow from these underlying assets is passed on to investors through instruments.
In view of the working group’s recommendations, directions from the RBI and meetings with various market participants, Sebi has now released a list of proposals for public consultation.
Main proposals regarding debt instruments
Ticket size: The minimum ticket size, i.e. the size of the investment by a single investor, will be ₹crore for regulated entities such as banks, small finance banks and NBFCs.
Number of investors: The number of persons to whom an offer or invitation may be made in the case of issuance of SDI (securitized debt instruments) on a private placement basis and proposed to be listed on the stock exchange may be revised to 200. The proposal states also that an offer or invitation to investors above this number will have to be conducted as a public issuance of SDIs.
When calculating the 200 person limit, invitations to qualified institutional buyers are excluded.
Offer period: The minimum and maximum number of days that the public offer can remain open are 3 and 10 days respectively.
Debt/claim: This specifies listed debt securities, trade receivables, rental receivables and equipment leasing receivables. In addition, Sebi may report other types of debts or receivables from time to time. No other debt or receivable (including unlisted debt securities) may be an underlying asset for an SDI.
Investor rights: The rights of investors in an SDI may not be changed without their consent.
SCORES: The entity issuing the listed SDIs must be registered on the SCORES platform.
Comments on this consultation document can be sent online to this link before November 16, 2024.
