‘From next fiscal, 25% of borrowing through corporate bond market a must for large cos’

From next fiscal, large corporates have to raise 25 per cent of their incremental borrowings only through the corporate bonds market, said market regulator SEBI in a circular on Monday.

SEBI defined large corporate as a listed entitiy (except banks), having an outstanding long-term borrowing (more than one year) of at least ₹100 crore and a credit rating of ‘AA and above. In case a large corporate is unable to comply with the requirement, it has to provide an explanation for such shortfall to the stock exchanges in a prescribed manner, SEBI said.

For entities following April-March as their financial year, the framework will come into effect from April 1, 2019, and for firms that follow calendar year as their financial year, it will be effective from January 1, 2020, the circular added.

While for FY20 and FY21 the requirement of meeting the incremental borrowing norms would be applicable on an annualised basis, from FY22, the mandatory borrowing needs to be met over a contiguous block of two years.

Further, at the end of the block, if there is any deficiency in the requisite bond borrowing, a monetary penalty of 0.2 per cent of the shortfall will be levied and the same will be paid to the stock exchange.

A listed entity which has been identified as a large corporate has to disclose that to the exchanges within 30 days from the beginning of a financial year, the market regulator said. Also, details of the incremental borrowings done during the financial year have to be disclosed within 45 days after the financial year.

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