SEBI issues guidelines on issuance of NCDs along with warrants

Securities and Exchange Board of India (SEBI) vide notification / Circular No. SEBI/HO/CFD/DIL/CIR/P/2021/614issued and publishes dated 13^thAugust, 2021, has introduced“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”n exercise of powers conferred by Section 11(1) read withSection 11A of the Securities and Exchange Board of India Act, 1992 read withRegulations 299 and 300 of the Securities and Exchange Board of India (Issue ofCapital and Disclosure Requirements) Regulations, 2018

Crux / Summary:

SEBI has issued guidelines for non-convertible debentures with warrants products, whereby it made the electronic book platform (EBP) mandatory for the non-convertible debt instruments(NCD) portion of the issue. The move is aimed at streamlining the procedure of issuance and applicability of the EBP mechanism on the NCDs portion.

18. The Circular was addressed to:

• All Recognized Stock Exchanges
• All Recognized Depositories
• Issuer Companies
• Merchant Bankers and Brokers registered with SEBI

18. Need of the Circular:
19. Toprotect the interests of investors in securities and
20. Topromote the development of, and to regulate the securities market.

17. Applicability of the provisions of this circular
18. This circular shall be applicable for all issues of ‘NCDs with Warrants’ made under ICDRRegulations, 2018, on or after the date of this Circular.

2. Entities involved in the ‘NCDs with Warrants’ issue process are advised to ensure compliance with this circular.
2.  

18. Framework:

17. Effects of this circular:

Stakeholders were consulted through a SEBI consultation paper regarding‘NCDs with Warrants’ as a product and on applicability of EBP platform mechanism on‘NCDs portion’ of the issue.

the following has been decided,in order to streamline procedure of issuance and applicability of EBP platform mechanism on the ‘NCDs portion, and made applicable for issues wherein the size of NCDs portion is above threshold prescribed under SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, and Circulars issued there under:

1. EBP platform mechanism shall be mandatory for ‘NCDs portion’ of the issue (for both stapled and segregated offer) and issuer shall be required to comply with the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, and Circulars issued there under.
2. ‘Warrants portion’ of the issue shall be in terms of Chapter VI on Qualified Institutions Placement under ICDR Regulations, 2018.
3. Of the ‘total issue size’ of the issue, at least 40% size shall consist of ‘Warrants portion’. It may be noted that ‘total issue size’ shall mean combined size of NCDs issue and the aggregate size of the warrants portion, including the conversion price of warrants.
4. The segregated offer of NCDs and stapled offer, both shall be exempted from the requirements as prescribed under the R

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