The Securities and Exchange Board of India (Sebi) on Wednesday said an electronic book mechanism will be mandatory for companies raising debt via private placements, aggregating to Rs 500 crore or more in a single fiscal year.
The move will help streamline procedures for issuance of debt securities on private placement basis, enhancing efficiency, transparency of the price discovery mechanism and improving liquidity in the secondary market.
The e-book mechanism is mandatory for all private placement issues on debt basis for more than Rs 500 crore with effect from July 1.
“Further, in case, the issuer comes with multiple issues in a financial year which are individually less than Rs 500 crore however, the aggregate issue size in the same year crosses Rs 500 crore, in such scenario, issuer shall use EBP mechanism for any incremental private placement which takes aggregate issue size in the year equal to Rs 500 crore or above,” the market regulator said in a set of FAQs.
The regulator also said that the mechanism is voluntary for those issues of debt securities which have a single investor and where the coupon rates are fixed.
However, arrangers acting as underwriters will not be considered as single investors in these cases. Recognised stock exchanges are eligible to act as electronic book providers (EBPs).
EBP is required to have all the necessary infrastructure like adequate office space,equipments, risk management capabilities, manpower and other information technology infrastructure to effectively discharge its activities.
It will have to ensure that there is adequate backup, disaster management and recovery plans for the e-book mechanism provided by EBP.
