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K.R. Srivats

New Delhi , Oct. 3

DEBT securities issued on a private placement basis by listed companies and sought to be listed on a stock exchange has to carry a credit rating of "not less than investment grade" from an agency registered with the Securities and Exchange Board of India (SEBI).

This stipulation forms part of the capital market regulator's new set of norms on issuances of privately placed debt securities by listed companies.

These norms have been issued by the SEBI to provide greater transparency to such issuances and to protect the interest of investors in such securities, a circular issued by the SEBI said.

The SEBI has also ruled that such securities should be issued and traded in demat form. Further, the trading in privately placed debts can only take place between Qualified Institutional Investors (QIBs) and High Networth Individuals (HNIs), in standard denomination of Rs 10 lakh.

A listed company issuing privately placed debt securities should appoint a debenture trustee registered with the SEBI in respect of such securities.

The company would also be required to make full disclosures (initial and continuing) in the manner prescribed in Schedule II of the Companies Act, 1956, SEBI (Disclosure and Investor Protection) Guidelines, 2000 and the Listing Agreement with the exchanges.

However, if the privately placed debt securities are in standard denomination of Rs 10 lakh, such disclosures may be made only through Web sites of the stock exchange where the debt securities are to be listed.

Every listed company issuing such privately placed debt securities would be required to sign a separate listing agreement with the stock exchange in respect of debt securities and comply with the conditions of listing.

All trades with the exception of spot transactions, in a listed debt security, can henceforth be executed only on the trading platform of a stock exchange.

The SEBI has also held that registered intermediaries that associate themselves with the issuance of private placement of unlisted debt securities would be held accountable for such issues. They would also be required to furnish periodical reports to the SEBI in such format as may be decided by market regulator.

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