SEBI Relaxes Norms To Allow Issuers To Sell Debt Securities At Lower Face Value

Markets regulator Sebi on Thursday relaxed rules to allow issuers to sell debt securities at a lower face value of Rs 10,000 even if they are zero-coupon instruments, provided they have a fixed maturity and no structured obligations.

As a result, issuers can now issue debt securities at a reduced face value that are either interest-bearing or zero-coupon in nature, according to a circular issued by the Securities and Exchange Board of India (Sebi).

Sebi, through a circular in July 2024, allowed companies to issue certain debt securities like bonds or non-convertible redeemable preference shares with a reduced face value of Rs 10,000, down from higher amounts, to make them more accessible. However, this only applied to securities that paid regular interest or dividends.

Market participants highlighted that zero-coupon bonds do not offer periodic interest but are issued at a discount and redeemed at face value, with investors earning returns through price appreciation over time.

Considering this, Sebi has now partially tweaked the framework to allow issuers to offer zero-coupon debt securities with a fixed maturity and no structured obligations at the reduced face value of Rs 10,000.

Consequently, 'the issuer shall be eligible to issue debt security at a reduced face value which may be either interest-bearing or zero interest-bearing security', Sebi said.