Ease of doing business and development of corporate bond markets –revision in the framework for fund raising by issuance of debt securities by large corporates (LCs)
- Regulation 50B of SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations) read with ChapterXII of the NCS MasterCircular2on ‘Fund raising by issuance of debt securities by large corporates’ (LC Chapter), inter-alia, mandates LCsto raise a minimum 25% of their incremental borrowings in a financial year through issuance of debt securities which were to be met over a contiguous block of three years from Financial Year (FY) 2022 onwards.
- Taking into account prevailing market conditions and representations from market participants, the framework for fund raising by issuance of debt securities by LCs is revised as specified in further paragraphs.
- Applicability of the framework:
3.1. This framework is applicable with effect from April 01, 2024 for LCs following April-March as their financial year. This framework is applicable with effect from January 01, 2024, for LCs which follow January-December as their financial year.
Explanation 1: The term “Financial Year” here would imply April-March or January-December, as followed by an entity. Thus, FY 2025 shall mean April 01, 2024 -March 31, 2025 or January 01, 2024 -December 31, 2024, as the case may be.
3.2. The framework shall be applicable for all listed entities (except for Scheduled Commercial Banks), which as on last day of the FY (i.e. March 31 or December 31):
a) have their specified securities or debt securities or non-convertible redeemable preference shares listed on a recognised Stock Exchange(s) in terms of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations); and
b) have outstanding long term borrowings of Rs.1000 crore or above.
Explanation 2: ’Outstanding long term borrowings’ for the purpose of this framework shall mean any outstanding borrowing with an original maturity of more than one year but shall exclude the following:
i. External Commercial Borrowings;
ii. Inter-Corporate Borrowings involving the holding company and/ or subsidiary and/ or associate companies;
iii. Grants, deposits or any other funds received as per the guidelines or directions of Government of India;
iv. Borrowings arising on account of interest capitalization;and
v. Borrowings for the purpose of schemes of arrangement involving mergers, acquisitions and takeovers.and
c) have a credit rating of “AA”/“AA+”/AAA”, where the credit rating relates to the unsupported bank borrowing or plain vanilla bonds of an entity, which have no structuring/ support built in.
Explanation 3: In case a listed entity has multiple ratings from multiple rating agencies, the highest of such ratings shall be considered for the purpose of this framework.
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