Securities and Exchange Board of India (SEBI) has issued a clarification on issuance and listing of perpetual debt instruments, perpetual non-cumulative preference shares and similar instruments under under Chapter V of the SEBI (Issue and Listing of Non-convertible Securities) Regulations, 2021. This clarification was issued on 8th February, 2023 and comes into immediate effect.
It may be recalled that Chapter V of the NCS Regulations, prescribes the conditions for issuance and listing of perpetual debt instruments, perpetual non-cumulative preference shares and similar instruments.
Several market participants, including issuers and merchant bankers, have referenced SEBI seeking clarity on the applicability of the provisions of Chapter V of the these Regulations, wherein the security is proposed to be issued for a fixed maturity and which shall not have features viz. option of conversion to equity, write-off, etc.
SEBI has now clarified that only securities which have characteristics as stated below, shall necessarily be required to comply with the provisions for issuance and listing as follows:
- The issuer is permitted by RBI to issue such instruments
- The instruments form part of non-equity regulatory capital
- The instruments are perpetual debt instruments, perpetual non-cumulative preference shares or instruments of similar nature and
- The instruments contain a discretion with the issuer/RBI for events such as:
- conversion into equity;
- write-off of interest/ principal;
- skipping/ delaying payment of interest/principal;
- making an early recall;
- changing any terms of issue of the instrument.