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SEBI proposes dropping merchant banker rule for small debt
The Hindu BusinessLine··28 Aug
SEBI proposed exempting listed companies from appointing a merchant banker for small-value private placements of debt. Current rules require at least one merchant banker for private placements of debt or non-convertible redeemable preference shares with a face value of Rs 10,000. SEBI said the mandate raises costs and delays price-sensitive issues. Public comments are invited by September 17.
Prism
What It Means For You
- Listed firms raising small private debt could skip merchant banker fees if all four exemption conditions are met.
- Investors in those issues would rely more on issuer disclosures and auditor certificates instead of a mandated banker process.
- Comment letters to SEBI by September 17 can still change the final shape of the exemption.
What's Happening
- SEBI also cited a limited pool of merchant bankers active in the debt segment as a market bottleneck.
- The proposal is limited to private placements, not a blanket removal of bankers from all debt deals.
- Face value of Rs 10,000 is the threshold named in the current mandatory-appointment rule under review.
Who would qualify for the exemption
- Issuers must be registered with or regulated by a financial sector regulator such as SEBI, RBI, IRDAI or PFRDA.
- They must have been listed for at least one year and have no pending listing-related fines from SEBI or exchanges.
- They must not have defaulted in the last three financial years and the current year on specified repayments, and must file an auditor certificate.
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