SEBI proposes merchant banker exemptions for small-value debt

The Securities and Exchange Board of India (SEBI) has proposed a new regulatory exemption to ease the burden on listed issuers raising small-value debt through private placements. Currently, the framework requires these issuers to appoint at least one merchant banker, a process SEBI notes can impose a “disproportionate burden of the appointment cost” and cause execution delays due to a limited number of bankers in the debt segment.

Under the proposed rules, the exemption would apply to debt securities or non-convertible redeemable preference shares with a face value of Rs 10,000. To qualify, issuers must be regulated by an Indian financial-sector regulator, have been listed on a recognized stock exchange for at least one year, and have no history of defaults on repayment obligations during the last three financial years and the current year. Additionally, the debt must be unsubordinated or senior, secured by a first or pari passu charge on identifiable assets, and carry a credit rating of at least AA-.