SEBI Mandates E-Book Mechanism for Private Debt Securities Above Rs 20 Crore

NEW DELHI, May 18: The Securities and Exchange Board of India (SEBI) has introduced a significant change in the regulatory framework for private placement debt issues. The new rules make the Electronic Book Provider (EBP) platform mandatory for all private placement debt issues of Rs 20 crore or above. This move, based on recommendations from a working group and public feedback, aims to enhance the efficiency of the EBP platform.

Under the new framework, the use of the EBP platform is now mandatory for private placements of debt securities, non-convertible redeemable preference shares (NCRPS), and municipal bonds, where the issue size is Rs 20 crore or more. This includes single, shelf, and subsequent issues within a financial year. Previously, the mechanism was mandatory for all private placements of debt securities with an issue size of Rs 50 crore or more.

SEBI has also extended the scope of the EBP platform to include Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). Before this, there was no specific regulatory provision for these entities. "An issuer, if desirous, may choose to access the EBP platform for private placement of securitised debt instruments or security receipts or commercial papers (CPs), certificates of deposit (CDs) and issuers constituted as REITs, SM REITs and InvITs can also access the EBP platform for private placement of units of REITs, SM REITs and InvITs," SEBI stated on Friday.

Issuers are required to submit the placement memorandum and term sheet, containing key terms and conditions, at least two working days before the issue opens, or three working days in the case of first-time users of the EBP. The documents must disclose the base issue size and any green shoe option, which is capped at five times the base size. Additionally, past green shoe allocations must be disclosed.

Depending on the credit rating of the instrument, issuers can reserve a portion of the issue for anchor investors. The reservation limits are 30 per cent for AAA to AA-, 40 per cent for A+/A-, and 50 per cent for others. Anchor investors will have to confirm their participation electronically one day before the issue. Unconfirmed amounts will be reallocated to the base issue.

To ensure transparency, SEBI has mandated that if multiple bids are received at the same cut-off price, allotments must be made on a proportionate basis. The EBP is required to publicly update detailed bidding and issue-related information on its website by the end of the bidding day or by 1 PM the next day, depending on when the issue closes.

Revised timelines have been introduced to obtain in-principle approval from stock exchanges. For EBP-based issues, this approval must be obtained by T-2 or T-3, and for non-EBP issues, it must be obtained before the issue opens.

These changes will come into effect immediately, except for certain clauses related to anchor investors, disclosures, and reporting, which will be implemented three to six months from the circular’s date. (PTI)