The Securities and Exchange Board of India (“SEBI”) has issued guidelines on issuance of non-convertible debt instruments along with warrants (“NCDs with Warrants”) in terms of Chapter VI – Qualified Institutions Placement of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”) vide circular no. SEBI/HO/CFD/DIL/CIR/P/2021/614 dated August 13, 2021 (“Circular”).
Regulation 179 under Chapter VI of the ICDR Regulations permits a qualified institutional placement where NCDs and warrants offering can be attached to each other (“stapled offer”) or offered separately (“segregated offer”) for subscription. Further, SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“Regulations”) governs issue and listing of non-convertible securities and provides for Electronic Book Provider platform (“EBP platform”).
To streamline the issuance and applicability of EBP platform mechanism with respect to NCDs both in a stapled offer as well as a segregated offer, following has been made applicable for issues wherein the size of the NCD offer is above the threshold prescribed under Regulations:
i) 175(3): This states that the preliminary document and the placement document shall be serially numbered and the copies of it must be circulated to only select investors;
ii) 179(2)(a): This regulation 179(2) provides for the conditions to be met for allotment of specified securities. 179(2)(a) requires a minimum of 10% (ten percent) of the eligible securities to be allotted to mutual funds, provided that if any such securities remain unsubscribed then the same can be allotted to other qualified institutional buyers;
iii) 180(1): Sub-regulation (1) of regulation 180 provides for the minimum number of allottees for each placement of eligible securities made under Chapter VI of the ICDR Regulations;
iv) 180(2): Sub-regulation (2) of regulation 180 states that qualified institutional buyers belonging to the same group or who are under same control shall be deemed to be a single allottee.
The circular is applicable for all issues of NCDs with warrants from the date of the Circular.
Please find a copy of the Circular here.
This update has been contributed by Adity Chaudhury (Partner) and Nipuna Varman (Associate).
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