Nithin Kamath, the co-founder of Zerodha, has always expressed support for bonds as a stepping stone for Indian investors as they have better returns than fixed deposits (FD) and less risk as compared to stocks.
Previously, bonds were mainly accessible to high-net-worth individuals (HNIs), but that has changed after a change brought in by Sebi.
In a bid to encourage retail investors to engage more in the corporate bond market, the Securities and Exchange Board of India (Sebi) has reduced the face value of these debt securities from Rs 1 lakh to Rs 10,000.
“Companies can now issue bonds with a face value of Rs 10,000. This is a great move that can help attract retail participation in bonds. With all the changes in the last few years, Sebi has done an amazing job of making bonds accessible to small investors,” said Kamath in a recent post.
Kamath had previously expressed concern about the unavailability of bonds with smaller face values.
“Most bonds are issued through private placements and have face values of Rs 10 lakh or more. So, retail investors were priced out,” Kamath said earlier.
Sebi has also announced a framework for unit-based employee benefits (UBEB) concerning real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).
In addition to reducing the denomination, Sebi has standardised the record date for identifying eligible holders, harmonised the format of due diligence certificates provided by debenture trustees, and introduced flexibility regarding the publication of financial results in newspapers for entities that list only non-convertible securities.
The Sebi board approved a proposal to allow issuers to issue Non-Convertible Debentures (NCDs) or Non-Convertible Redeemable Preference Shares (NCRPS) through private placement mode at a reduced face value of Rs 10,000, alongside the requirement to appoint a merchant banker.
These NCDs and NCRPS should be plain vanilla, interest or dividend-bearing instruments. Credit enhancements will be allowed in such instruments.
To address inconsistencies related to the fixation of record dates and to bring uniformity in market practices, the Sebi board approved that record dates for payment obligations (interest and principal repayment of debt securities or NCRPS) should be set 15 days before the due dates.
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