The Securities and Exchange Board of India on 28th October 2022, has notified amendments to chapter V (Denomination of issuance and trading of Non-convertible Securities) of the Operational Circular. Through which it has notified that the face value of each debt security or non-convertible redeemable preference share issued on private placement basis shall be Rs. One lakh.
SEBI in its earlier notification dated 10th August 2021, prescribed provisions pertaining to denomination of issuance and trading of Non-convertible Securities. It mandates that the face value of each debt security or nonconvertible redeemable preference share issued on private placement basis shall be Rs. Ten lakh and the trading lot shall be equal to the face value.
However, SEBI received representations from various market participants, including issuers, requesting for review of the said denominations. In particular, non-institutional investors consider the high ticket size as a deterrent which restricts their ability to access the market for corporate bonds. If the face value and trading lot is reduced, more investors can participate, which in turn will enhance the liquidity in the corporate bond market
Therefore it has notified that the face value of the listed debt security and non-convertible redeemable preference share issued on private placement basis traded on a stock exchange or OTC basis shall be Rs. One lakh and provisions of this circular shall be applicable to all issues of debt securities and nonconvertible redeemable preference shares, on private placement basis, through new ISINs, on or after January 1, 2023.
Provided that with respect to a shelf placement memorandum which is valid as on January 1, 2023, the issuer thereof shall have the option while raising funds through tranche placement memorandum, to keep the face value at Rs. Ten lakhs or Rs. One Lakh.