The Securities and Exchange Board of India, or Sebi, on Friday eased proposed rules related to the electronic book platform (EBP), a bidding mechanism for bond sales on a private placement basis on stock exchanges, as the current recommendations were seen as too restrictive.
The revisions are aimed at streamlining the processes, enhancing transparency and encouraging other asset classes to use EBP, said Sebi in the circular.
Launched in July 2016, EBP is a bidding platform for companies aiming to raise funds through bonds on a private placement basis. Currently, bond deals above Rs500 crore have to mandatorily route the bidding through EBP.
On 22 May 2017, Sebi had issued a discussion paper to make the EBP mechanism more effective. However, the industry has protested against some of the proposals, which could force participants towards over-the-counter (OTC) deals, said market participants.
The main points of contention are on compulsory EBP for issues up to Rs50 crore, bidding by qualified institutional buyers (QIBs) and compulsory holding of securities for 60 days if the bidding is done by the arranger for his proprietary book, said a senior official of a PSU bank.
In the revised norms, Sebi has made EBP compulsory for issue size of Rs200 crore. The new Sebi circular also does not mention the proposed holding duration of securities.
“The proposed compulsory holding and lock-in for securities was against market liquidity of papers. If there is no such rules for holding shares, I don’t see any merit in applying it for bonds,” said Ajay Manglunia, executive vice-president, head-fixed income, Edelweiss Financial Services.
According to Sebi data, in FY17, out of total private placement of debt securities reported on exchanges of Rs6.41 trillion since the July 2016 implementation of EBP, 696 issuances worth Rs2.94 trillion have been done through EBPs. The other changes in the EBP mechanism include allowing withdrawal of the issue. “However, subsequent to such withdrawal, the issuer shall not be allowed to access a EBP platform for a period of seven days from date of such withdrawal,” Sebi said in the circular.
QIBs have been tagged as eligible participants and bidding would be done on their behalf by arrangers of the deal, Sebi said.