Coronavirus Impact: SEBI Relaxes Norms For Debt Instruments And Redeemable Shares

The market regulator has relaxed timelines, norms and compliance pertaining to commercial papers and non-convertible debentures.

The SEBI headquarters in Mumbai. (Photograph: BloombergQuint) 
The SEBI headquarters in Mumbai. (Photograph: BloombergQuint) 

The market regulator, in a bid to shield companies from the slowdown caused by the outbreak of the novel coronavirus, has relaxed norms and compliance relating to non-convertible debentures, commercial papers and other debt and equity instruments.

That comes after the Securities and Exchange Board of India relaxed timelines for submission of financials by listed companies earlier this month.

The SEBI said in a circular today—which comes into effect immediately—that the norms apply to all listed companies that have issued securities on a stock exchange under its listing regulations.

Here are the key relaxations granted by the market regulator.

What Has Changed ?

Anyone issuing non-convertible debentures, non-convertible redeemable preference shares and commercial papers, according to existing listing regulations, must submit financials that are not older than six months.

Those planning to issue such instruments before March can rely on the financials of the quarter ended September. The market regulator has now permitted the usage of September quarter financials for issuing instruments till May 31—an extension of 60 days.

This circular is a much needed relief for entities with listed debt securities or are in the process of listing such securities and their auditors, Prashant Daftary, partner in NA Shah Associates, told BloombergQuint.

The relaxation by SEBI is beneficial for companies relying on debt instruments to raise capital, Prashant Gupta, national practice head-capital markets, Shardul Amarchand Mangaldas, told BloombergQuint. “The extension provided by SEBI for companies with listed debt securities are welcome in the current unprecedented shutdown of commercial activity globally and in line with relaxations provided by SEBI for certain periodic filings for listed companies.”

Another important change pertains to the initial and annual disclosures by large corporates covered under SEBI’s November 2018 circular. A large corporate, as per SEBI’s circular, is a company which has long-term borrowings of Rs 100 crore and above.

Such companies, according to existing regulations, must make an initial disclosure within 30 days from the start of a financial year, while an annual disclosure must be made within 45 days after the end of fiscal. The market regulator has now relaxed these timelines by 60 days and 45 days, respectively.

The market regulator has also extended the timelines for submission of half-yearly and annual financials by issuers of commercial papers by 45 and 60 days, respectively. Gupta pointed out that the effectiveness of these relaxations will be dependent on the state of the financial markets.

“It remains to be seen for new issuance as to how onshore debt markets remain available for capital raising in the coming weeks given the turmoil in the financial markets, but it’s likely that certain issuers who are adversely impacted by the shutdown will need to access the debt markets to refinance or meet other working capital or debt requirements,” he said.

Daftary said the speed at which the regulator is acting indicates a proactive stance. “The speed at which SEBI is addressing issues and difficulties faced by corporates on account of virtual shut down is commendable and in line with regulatory trends worldwide”

SEBI’s action is in tandem with the relaxations by other regulators. “Considering the March 31 deadline, this extension addresses the year-end hustle and goes in tandem with the extension of the financial year by the Reserve Bank of India,” Vidisha Krishnan, partner in MV Kini & Co., told BloombergQuint.