Spooked by Sebi, dealers set to petition market regulator against new norms

Public-sector companies, spooked by Securities Exchange Board of India’s (Sebi) new settlement process for corporate bond primary issues, is set to meet the market regulator’s whole time director Gurumoorthy Mahalingam today, three state-run issuers with direct knowledge about the matter said.

“We wanted to hit the market after the policy, but this one-day float has raised worries about cost issues. We are waiting for some clarity on this and many other issues from the regulator,” said a senior official with a major public-sector company.

On January 5, Sebi made Electronic Book Platform (EBP) compulsory for all corporate bond primary issues of Rs 200 crore. EBP is a bidding mechanism for bond sales on a private placement basis on stock exchanges.

The rule became effective from April 1, 2018.

EBP will also ensure that the pay-in of funds towards allotment of securities, placed through EBP platform, is done through National Securities Clearing Corporation Ltd (NSCCL).

The new rules have also put restrictions on merchant bankers’ objective of underwriting the fundraising plans by making it compulsory for investors to bid directly for amounts exceeding Rs 15 crore or 5% of the offer size, whichever is lower.

All this had created a lot of confusion among corporate bond market participants, forcing them to write to the exchange houses to avoid the delay of fund transfers as well as grant clarity to the merchant bankers over the validity of the license granted to them.

“Most of us have written to exchange houses to consider the cost levied due to delay in transfer of funds to issuers’ account, but the exchanges said they are awaiting a response from Sebi,” said debt fund arranger with a major private-sector bank.

Meanwhile, a senior official with a large PSU, which regularly borrows by selling bonds, said, “If we do not get a concrete response from Sebi on Monday, we will be forced to approach the finance ministry.”

Source: DNA Money