Brief Overview:
Listed non convertible debt securities (“NCDs”) including non-convertible redeemable preference shares (“NCRPS”) can be issued at a reduced face value of INR 10,000/-. Previously, it was permitted to issue listed NCDs and NCRPS with a face value of INR 1,00,000/- only.
Technical Details:
The issue of listed NCDs and NCRPS at such lower face value of INR 10,000/- is permitted subject to certain restrictions as regards structuring of such lower face value debt securities i.e. (i) such securities shall be interest/dividend bearing paying coupon/ dividend at regular intervals with a fixed maturity without any structured obligations; and (ii) credit enhancements can only be in the form and nature as set out in the circular. Further, the above is facilitated only pursuant to a condition that at least 1 a merchant banker is appointed.
JC takeaway:
The step towards lowering the ticket size of debt securities is with a view to encourage more non-institutional investors to participate in the Indian bond markets and this in turn may also enhance liquidity in the Indian bond markets.
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