The Securities and Exchange Board of India on Thursday eased norms for large corporates (LCs) to meet their financing needs from the debt market.

The framework will apply to all listed entities that have outstanding long-term borrowings of ₹1,000 crore or above with a credit rating of AA/AA+/AAA. The previous stipulated limit was ₹100 crore. The new framework provides an incentive for compliance in lieu of penalty.

A large corporate will raise not less than 25 per cent of its qualified borrowings by way of issuance of debt securities. This requirement can be met over three years.

At the end of three years, if the actual borrowings through debt securities are more than 25 per cent of the qualified borrowings for a particular financial year, the annual listing fees pertaining to debt securities or non-convertible redeemable preference shares and contribution to the core settlement guarantee fund will be reduced.

A shortfall will lead to a disincentive in the form of additional contributions to the core SGF. Currently, a monetary penalty of 0.2 per cent of the shortfall in the borrowed amount is levied. “The move by the regulator will deepen the bond market in Asia’s third largest economy. Elimination of penalty provisions for non-compliance along with incentives or concessions in listing fees of debt would aid in ease of doing business. Further, SEBI has stated that one-time relaxation from the penal provision will be given to listed entities who endeavoured but couldn’t raise incremental borrowing through the debt market till now,” said Makarand M Joshi, Founder, MMJC & Associates.

The new norms will apply from April 1, 2024, for large corporates following April-March as their financial year, and on January 1, 2024, for those following a January-December financial year.

The proposals for the new framework were approved by the SEBI board last month.

comment COMMENT NOW