SEBI issues guidelines on issuance of non-convertible debentures with warrants through Qualified Institutional Placement

The Securities and Exchange Board of India has issued circular dated 13th August 2021 providing the guidelines on issuance of non-convertible debt instruments along with warrants (‘NCDs with Warrants’) in terms of Chapter VI – Qualified Institutions Placement of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

The guidelines introduced vide circular are:

• Regulation 179 of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 states that in a qualified institutions placement of non-convertible debt instrument along with warrants, an investor can subscribe to the combined offering of non-convertible debt instruments with warrants or to the individual securities, that is, either non-convertible debt instruments or warrants.
• SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, governs issue and listing of non-convertible securities, on a recognized stock exchange and provides for Electronic Book Provider platform (EBP platform), offering an efficient and transparent price discovery mechanism.
• Further in order to streamline the procedure of issuance and applicability of EBP platform mechanism on the ‘NCDs portion’, the following has been decided and made applicable for issues wherein the size of NCDs portion is above threshold prescribed under SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, and Circulars issued there under:

1. EBP platform mechanism shall be mandatory for ‘NCDs portion’ of the issue (for both stapled and segregated offer) and issuer shall be required to comply with the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021,
2. In the staple product, warrants are attached with NCDs, while in the segregated product, NCDs and warrants can be subscribed separately.
3. Of the ‘total issue size’ of the issue, at least 40% size shall consist of ‘Warrants portion’. It may be noted that ‘total issue size’ shall mean combined size of NCDs issue and the aggregate size of the warrants portion, including the conversion price of warrants.
4. The segregated offer of NCDs and stapled offer, both shall be exempted from the requirements as prescribed under the Regulations 175(3), 179(2) (a), 180(1), and 180(2) of the ICDR Regulations, 2018.

*Tanvi Singh, Editorial Assistant has reported this brief.