By TIOLCORP News Service

MUMBAI, JULY 01 2017: The Securities Exchange Board of India (SEBI), vide a Circular dt. 30th June 2017 addressed to all recognized stock exchanges and depositories, released specifications pertaining to International Securities Identification Number (ISIN), for all debt securities issued under the SEBI (Issue & Listing of Debt Securities) Regulations, 2008. Such specifications were released upon the recommendations of a working group on the "Development of corporate bond market in India", which went on the hold that issuers facing frequent debt issues with the same tenor, could club them under the same umbrella of ISIN, the result of which would be an increased float in the market, which would enhance the liquidity of such security.

Thereby, concerning private private placement of debt securities, it was first specified that a maximum of 17 ISINs would be allowed during an FY. Nonetheless, an additional 12 ISINs would also be available for the issuance of the capital gains tax debt securities by the authorized issuers u/s 54EC of the Income Tax Act 1961, on private placement basis. Further, the bifurcations of the 17 ISINs available were also enumerated, wherein maximum 12 ISINs maturing in an FY were reserved for plain vanilla debt securities, while a maximum of 5 ISINs were allowable only for structured products or market linked debt securities. However, an issuer was allowed to utilise the entire bucket of 12 ISINs in an FY only for structured/market linked debt securities In such case, the additional 5 ISINs would unavailable to the issuer for either purpose.

Pertinently, the provisions of this Circular would apply only to securities issued in the FY 2017-18 and would not apply to ISINs maturing w.r.t. debt securities issued prior to FY 2017-18. However, post FY 2017-18, all issuances made by the issuer would be grouped and consolidated under the ISIN maturing in the same FY.

Moreover, the Circular also enumerated several classes of debt securities which were exempted from the applicability of ISINs, notably, Tier-II bonds issued by the Housing Finance Companies, whose maturity period was not less than five years. Other exemptions included Tier-II bonds issued by Standalone Primary Dealers, with minimum maturity of five years; Subordinated debt issued by insurance companies, either perpetual or having maturity period of less than ten years; Additional Tier-I bonds which are perpetual & issued by banks under Basel III norms; bonds issued by banks to raise resources for lending to long-term infrastructure sub-sectors; Perpetual debt instruments issued by Systematically Important Non-Deposit taking NBFCs, and lastly, Tier-II bonds issued by Non-systematically Important Non-Deposit taking NBFC.

The Circular also laid out the procedure for honouring debt obligations arising out of capping of ISINs, wherein an issuer could honour its debt/obligations arising out of ISIN restriction, in any manner deemed feasible to them. AN issuer could also offer different types of payment options to different categories of investors, subject to disclosures being made in the information memorandum so as to manage their asset liability mismatch. Moreover, where any modification in structure or terms, w.r.t. change in interest pay-out frequency, etc. had to be made, the issuer could do so by following the prodecure laid out in Regulation 59 of the SEBI Regulations 2015.

The Circular also prescribed a six-month time period for making the necessary changes in the Articles of Association, charter or constitution of the issuer. Lastly, the Circular also listed provisions pertaining to reporting and monitoring by issuers and recognized stock exchanges and depositories.

The provisions of this SEBI Circular dated June 30, 2017 would have immediate effect in consonance with the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, and was issued in exercise of powers consferred u/s 11(1) of the SEBI Act, 1962, with the objective of protecting the interests of investors w.r.t. securities and to promote & regulate the development of the securities market.