SEBI Proposes Allowing Zero-Coupon Bonds At Reduced Face Value Of Rs 10,000

SEBI on Friday proposed a modification in rules by allowing issuance of zero-coupon debt securities and non-convertible redeemable preference shares at a reduced face value of Rs 10,000. The move came as a response to market feedback that the current framework, which mandates that only interest or dividend-bearing instruments qualify for such lower denomination issuance excludes zero-coupon or zero-dividend securities, limiting issuer and investor flexibility.

In a consultation paper, SBI proposed that it will allow issuers on a private placement basis either interest/dividend-bearing securities with regular payouts or zero interest/dividend securities -- both at a face value of Rs 10,000, provided they have fixed maturity and carry no structured obligations.

This change, if approved, will be applicable to all issues of debt securities and non-convertible redeemable preference shares, on private placement basis that are proposed to be listed on the exchanges, SEBI said.

Taking note of these suggestions, the regulator has issued a draft circular and invited public comments till Aug. 21.

The regulator also asked stock exchanges, depositories, and clearing corporations to take necessary steps and update their systems in accordance with the revised rules.